Nigeria to hold investor roadshow next week
Minister of Finance, Mrs Kemi Adeosun
Nigeria will hold a non-deal roadshow in London next week, government sources said on Wednesday, as Africa’s biggest economy explores fund-raising options to finance a record budget deficit widened by the fall in vital oil revenues.
Finance Minister Kemi Adeosun and officials from the central bank and debt office will meet investors next Tuesday to update the market on government policies. Standard Chartered Bank is organising the meeting, the source said.
Nigeria plans to borrow as much as $10 billion from debt markets, with about half of that coming from foreign sources, to help fund a budget deficit worsened by the slump in oil prices that has slashed revenues and weakened the naira.
“It’s non-deal roadshow to explain government policy to investors. There’s no transaction. It’s been a while since the government came to London to update investors on what’s happening,” he said.
The head of the Debt Management Office told Reuters last week Nigeria is likely to sell a eurobond this year.Nigeria has pushed ahead with some reforms meant to free up cash to invest in badly needed infrastructure, but critics worry about the pace, given the loss of oil revenues and a currency peg that has caused the economy to contract.
In mid-May the government hiked petrol prices by 67 percent to 145 naira, ending an expensive subsidy scheme that has cost it billions of dollars. It used a rate of 285 naira to the dollar to set the prices, compared with an official rate of 197.
The move prompted the central bank to abandon its 15-month naira peg to the dollar to adopt a flexible currency regime, a policy U-turn designed to boost exports and local manufacturing and to stave off a recession.
But the bank has yet to clarify how the new policy announced last week will work, spooking foreign investors long worried about getting caught in the middle of a devaluation.
President Muhammadu Buhari for months rejected calls to devalue the naira. However, during his Democracy Day speech on Sunday he backed the central bank’s decision to move away from a currency peg that is seen as overvaluing the naira.
A banking source in London told Reuters that the market was in the dark over the central bank’s new currency policy.“The reason why Nigeria is reluctant to come to the market is that the government knows investors will ask about the currency issue,” the banker said.
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5 Comments
There is no need to go on a road show in foreign country. The domestic market has the capacity to finance the budget if the government just put the right policy in place. Pension fund has being calling for good policy so they can invest. Nigerian’s abroad send back over 20 billion dollars each year and have the capacity to also invest in the country. There is a need to look inward for all our financing before we begin to accept international fund loaded with conditions that are not favorable to Nigeria.
MY QUESTION HERE IS THAT WHY ARE WEALTHY NIGERIANS SHY AWAY FROM THEIR RESPONSIBILITIES? THERE ARE HIDDEN FUNDS LOCALLY AND IF PROPERLY HARNESSED, COULD TURN AROUND FAVOURABLE RESULTS FOR THE COUNTRY. OUR LOCAL INSTITUTIONAL INVESTORS SHOULD RALLY ROUND THE FEDERAL GOVERNMENT BY INVESTING HEAVILY BY PATRONIZING THE NIGERIAN STOCK EXCHANGE AND OTHER FINANCIAL INSTITUTIONS. NIGERIA HAS THE CAPACITY TO RAISE BILLION OF DOLLARS LOCALLY IF ONLY THE FEDERAL GOVERNMENT WOULD MAKE ADEQUATE ENABLING ENVIRONMENT AVAILABLE TO THE POPULACE. LET US ALL SET ASIDE POLITY, TRIBALISM AND HELP BUILD A STABLE AND VIRILE NATION. NIGERIANS SHOULD WAKE UP TO THEIR RESPONSIBILITIES. I CAN ASSURE YOU NIGERIANS IN DIASPORA CAN DOUBLE THEIR FINANCIAL CAPACITY AND COMMITMENT TOWARD THE REALIZATION OF GOALS AND OBJECTIVES OF THE NATION. LET THE ENABLING CONDITION BE MADE AVAILABLE TO FACILITATE AND ENCOURAGE THEIR RESPECTIVE PARTICIPATION.
It has to be a non-deal roadshow because Nigeria knows that it would not be well received. The government wants to finance its budget with $5 billion from foreign sources. Considering what the current government has been up to, I cannot see many takers for Nigerian bonds. The government knows this, that is why it is testing the waters. Having tried to ignore western sources of funds by raising the issue of financing its deficit with Chinese Yuan bonds, and then Japanese bonds issuance, the government returns with humility to London.
For commentators who believed like Buhari and his minions that they could get funds from corrupt officials of the ex-government, it is clear from the failure to release names and assets recovered, that the sums recovered do not even come close to financing the budget.
As to the diaspora, they are no fools and are not going to exchange hard earned money at N199 to the dollar. So how can a government finance itself if no one will give it dollars at N199 to 1? It means for the government to attract diaspora funds, ahead of other importers, they must provide Naira at 350 to 1 i.e devalue.
The domestic market cannot finance the deficit without further increases in interest rates.
Government is willing to pay N285 to the USD for diaspora money. Won’t you sell?.
I would
Not if the parallel market is offering N350 to the $US dollar.
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