Nigeria to pay N24.8bn yearly as interest on $1bn Eurobond loan

By Odunewu Segun

Nigeria is expected to pay about N24.8bn as fixed interest on the recent $1bn Eurobond it offered in the international market for the next 15 years, National Daily has gathered

Interests on bonds, National Daily gathered are calculated and paid yearly with the total interest amounting to $1,181 billion (N372.093bn) spread across a 15-year period. Nigeria will therefore pay around $78,750,000 or N24, 806,250,000 per annum.

Notwithstanding the fact that the 2017 budget proposal already has N1.7 trillion for debt servicing, the country is expected to pay around N11.02billion to various brokers representing their 3.5 per cent commission in the deal.

However, the naira value of the fixed interest could further escalate in the intervening period should the local currency depreciate further than the N315/US$, which it exchanged for by last weekend.

According to details of the third Eurobond floated by Nigeria as released by Debt Management Office (DMO) and Federal Ministry of Finance, the deal has a 15-year maturity period at 7.875 per cent interest per annum.

Proceeds from the bond are part of the spending plans for 2016 budget which has close to N2 trillion deficits.

According to Finance Minister, Kemi Adeosun, the $1billion notes will bear interest at a rate of 7.875 per cent and will mature on February 16, 2032 with a bullet repayment of the principal.

She explained that proceeds of the notes would be deployed to funding capital expenditures in the 2016 budget.

“The notes were approximately eight times oversubscribed with orders in excess of $7.8billion compared to a pre-issuance target of $1.0billion demonstrating strong market appetite for Nigeria.

Provision for debt service is the third largest component of the 2017 fiscal plan, representing 23 per cent or one-fifth of the entire budget of N7.3 trillion.

Some economists have estimated that by the end of 2017, the country would have spent N4.1 trillion on debt servicing since 2015

In 2015, Federal Government made a budget provision of N943 billion for debt service, which rose more than 50 per cent to N1.48trillion in 2016.

The $1billion Eurobond is part of the almost $30 billion three-year debt plan being requested for approval from National Assembly by President Muhammadu Buhari.

Another component of $1.5billion from the $30 billion to rehabilitate Lagos-Ibadan axis of Lagos-Kano Rail Line has also been approved by China Exim Bank.