FG approves $2.2bn external borrowing

The Federal Executive Council on Thursday approved a $2.2bn external borrowing plan.

This is part of the Federal Government’s external borrowing programme for the 2024 Appropriation Act, the Finance Minister, Mr Wale Edun, told State House Correspondents after the Federal Executive Council meeting at the Aso Rock Villa, Abuja.

The financing initiative will combine Eurobond and Sukuk offerings—estimated at $1.7bn and $500m, respectively, to reinforce Nigeria’s fiscal stability, said Edun, adding that the results of the FG’s economic reforms qualified Nigeria for the international capital market financing.

He said the final allocation between these financial instruments will be determined based on market conditions and advice from transaction advisors, pending National Assembly approval.

“The first [memo] was to complete the borrowing programme of the FG in terms of the external borrowing with the approval of the $2.2bn financing programme made up of access to the international capital market for some combination of the Euro bond offer and the Sukuk bond offer.

“A Euro bond of about $1.7bn and Sukuk financing of another $500m the actual makeup of the financing which will be done as soon as the National Assembly has considered and seen fate to hopefully approve of the borrowing plan and the external borrowing approval is given, it will be done this year, as soon as possible after approval.

“The actual combination of instruments that will be raised will depend on what the advisors, the transaction advisors, the commercial advisers, and what they say about market conditions at the time we decide and we want to enter the market,” Edun explained.

He added that, earlier in the year, Nigeria’s successful domestic issuance of dollar bonds highlighted the growing resilience and sophistication of the country’s financial market, attracting both local and international investors who showcased confidence in the FG’s economic reform agenda.

This external financing initiative aligns with the administration’s broader economic recovery plan, focused on stabilising macroeconomic conditions, adjusting market pricing for foreign exchange and petroleum products, and supporting local production, he stated.

Edun explained, “Those key prices and those situations have been achieved, particularly as of October to where we had, once again in Nigeria, local refining of petroleum products that paved the way for the completion of what was started on May 29, 2023, which was to correct the macroeconomic imbalances that were in the economy.

“So it is on the basis and the strength of the progress to date that we do have a window to access the international capital market for up to $2.2bn in financing, that is part of the Nigerian 2024 Appropriation Act as amended.”

The FG also approved a N400bn Real Estate Investment Fund, which, it says, will revitalise long-term mortgage financing and tackle Nigeria’s massive housing deficit.

The fund, introduced by the Minister of Finance Incorporated, will make affordable, long-term mortgages available to Nigerians, significantly easing access to homeownership and supporting the completion of millions of housing units, Edun told State House Correspondents in Abuja.

Supported by government seed funding and long-term investors, Edun said the MOFI Fund promises to reduce mortgage rates and extend loan tenures, creating an economic ripple effect by stimulating the housing sector, generating jobs and encouraging private investment.

He explained, “The MOFI Real Estate Investment Fund will be, in the first instance, a N250bn fund that will provide low-cost, long-term mortgages to Nigerians that want to acquire houses.

“It will help to complete or help to fill part of the gaping 22-million-unit housing deficit…and pave the way for other investors, the private sector, also to come in and participate in this all-important housing construction industry with huge benefits and knock-on effects throughout the whole economy.

“Long-term investors have the opportunity to earn market rates of interest on investment and market returns market price-based rates of return on investment, which will be blended with seed funding of N150bn.”

Edun said the MOFI REIF will, in the first instance, target N250bn of funding for providing low-cost and long-term mortgages.

“When I say low cost, we are talking about low double-digit, maybe 11 to 12 per cent, maybe even less, depending on market conditions. And that will be achieved by attracting long-term savers such as life insurance companies and pension funds within the limits of what is allowed,” he explained further.

Through the fund, Edun argued that Nigerians can access loans with terms extending over 20 years at interest rates far lower than the current standard, which often reaches nearly 30 per cent with limited tenures of just a few years.

He said the adjustment would bring significant relief to Nigerians and fulfil a key commitment from the Tinubu administration to enhance homeownership opportunities while promoting economic growth and job creation.