The Federal Executive Council has approved a $2.2 billion external borrowing plan. This initiative aligns with the Federal Government's external borrowing strategy for the 2024 Appropriation Act, as confirmed by Finance Minister Mr. Wale Edun during a press briefing with State House Correspondents following the meeting at the Aso Rock Villa in Abuja.
The financing strategy will entail a combination of Eurobond and Sukuk offerings, estimated at $1.7 billion and $500 million, respectively, with the objective of bolstering Nigeria's fiscal stability. Edun emphasized that the outcomes of the government's economic reforms have favorably positioned Nigeria for financing in the international capital market.
He mentioned that the final distribution of these financial instruments will be influenced by market conditions and the recommendations of transaction advisors, pending approval from the National Assembly.
“The initial memo was to finalize the Federal Government's external borrowing program, which includes the approval of the $2.2 billion financing plan that allows access to the international capital market through a mix of Eurobond and Sukuk offerings.
The Eurobond is expected to be around $1.7 billion, with an additional $500 million from Sukuk financing. The specific structure of the financing will be established once the National Assembly reviews and hopefully approves the borrowing plan, allowing for execution within this year.
The precise combination of instruments will depend on the insights provided by our advisors regarding market conditions at the time of entry,” Edun elaborated.
He also highlighted that Nigeria's successful domestic issuance of dollar bonds earlier this year reflects the increasing resilience and sophistication of the country's financial market, which has attracted both local and international investors, demonstrating confidence in the government's economic reform initiatives.
This external financing initiative is in line with the administration's comprehensive economic recovery strategy, which aims to stabilize macroeconomic conditions, adjust market pricing for foreign exchange and petroleum products, and bolster local production, as stated by Edun.
He elaborated, “These critical price adjustments and conditions have been realized, especially as of October, leading to local refining of petroleum products in Nigeria. This progress is a continuation of efforts initiated on May 29, 2023, aimed at rectifying the macroeconomic imbalances within the economy.
“Based on the advancements made thus far, we now have an opportunity to access the international capital market for financing up to $2.2 billion, as outlined in the amended Nigerian 2024 Appropriation Act.”
Additionally, the Federal Government has sanctioned a N400 billion Real Estate Investment Fund, which is expected to rejuvenate long-term mortgage financing and address Nigeria’s significant housing shortfall.
Introduced by the Minister of Finance Incorporated, this fund will provide affordable, long-term mortgages to Nigerians, greatly improving access to homeownership and facilitating the completion of millions of housing units, Edun informed State House Correspondents in Abuja.
With backing from government seed funding and long-term investors, Edun noted that the MOFI Fund is designed to lower mortgage rates and extend loan durations, thereby creating a positive economic ripple effect by stimulating the housing sector, generating employment, and attracting private investment.
He stated, “Initially, the MOFI Real Estate Investment Fund will amount to N250 billion, aimed at offering low-cost, long-term mortgages to Nigerians seeking to purchase homes.
“This initiative will contribute to addressing part of the substantial 22-million-unit housing deficit and encourage further participation from private sector investors in this crucial housing construction industry, yielding significant benefits and positive impacts across the entire economy.”
Long-term investors can benefit from earning market interest rates on their investments, which will be combined with a seed funding of N150 billion to generate market-based returns. Edun stated that the MOFI REIF aims to secure N250 billion in funding initially to facilitate low-cost, long-term mortgages.
He clarified that "low cost" refers to interest rates in the low double-digit range, potentially between 11 to 12 percent, or even lower depending on market dynamics. This will be made possible by attracting long-term investors, including life insurance companies and pension funds, within regulatory limits.
Edun emphasized that through this fund, Nigerians will have access to loans with repayment terms of up to 20 years at significantly lower interest rates compared to the current market, where rates can approach 30 percent with short repayment periods. He noted that this initiative would provide substantial relief to Nigerians and fulfill a crucial promise of the Tinubu administration to improve homeownership and stimulate economic growth and job creation.