Nigeria concluded its highly anticipated Eurobond issue last week Wednesday, raising a total of $2.86 billion, comprising a $1.18 billion 7-year series, $1 billion 12-year series, and $750 million 30-year series, despite the commendable work of the DMO, analyst have said that 2018 budget implementation may not be fundamentally different from historical practice.
The robust subscription and better than expected pricing of the latest Eurobond issue, shows that investors’ view of Nigeria’s dollar debt position still remains positive, given the sustained spells of emerging market asset sell-offs, continued hawkish policy stance by the Federal government, with bond yields above 3 percent levels in the U.S, and recent plunge in oil price which could have weakened Nigeria’s negotiating power.
The Central Bank of Nigeria recently released its quarterly economic report by for the third quarter of 2018. The fiscal operations segment of the report highlighted a federal government expenditure of N1.0 trillion in Q3 2018. C
ollectively, the fiscal authority spent N3.6 trillion in the first 9 months of 2018, implying a 40 percent implementation rate so far.
Combining the latest Eurobond issue with the domestic net bond issuance of N571 billion raised thus far, the federal government is very close to completing the total borrowing of N1.6 trillion required to partly fund the deficit in the 2018 budget.
Nevertheless, the implementation rate is unsurprising considering the late passage and assent of the 2018 appropriation bill that extended into the better half of the year. At the current run rate, it is apparent that 2018 budget im
plementation may not be fundamentally different from historical practice; in 2016, the implementation rate was 72.5 percent and 2017 was 86.9 percent.
Analysts at United Capital said, “with the recently issued Eurobond expected to cover 45.5 percent of the deficit in the 2018 budget, we opine that the late budget passage and poor budget implementation remains a cog in the wheel of the Nigerian fiscal policy.“
Cordros Capital analysts also said “Raising the entire N800 billion shortfall directly from the domestic market may prove a daunting task for the federal government. Hence, we expect the CBN to help moderate excessive paper issuances while sustaining the government’s goal of cutting down on borrowing costs. With all these said, the government have a big problem of implementing the budget, it might even have an implementation rate that is lower than the previous years.”