A member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has expressed concern over Nigeria’s preference for dollar-denominated debt with its attendant high-interest rate and associated exchange rate risk.
In his personal statement at the last Monetary Policy Committee (MPC) meeting in May, Robert Asogwa said Nigeria’s penchant for Eurobond “may likely hurt Nigeria sooner than anticipated.”
Citing an International Monetary Fund (IMF) report, he said Nigeria is one of the countries that may likely move into debt distress, “given the staggering $100 billion public debt stock as of March 31, 2022.”
He frowned at the increasing accumulation of Eurobonds by the federal government at high-interest costs.
“The unexplained government preference of Eurobonds at high-interest costs, with the associated exchange rate risk may likely hurt Nigeria sooner than anticipated,” he said.
He said “the escalating fiscal sector deficits with the attendant rising debt ratios are part of the weak links in the domestic economic environment.
“The poor revenue growth in a period of expanding government expenditure has continued to soar the budget deficit levels in the first quarter of 2022, similar to the trend witnessed in 2021.”
Nigeria raised $1.25 billion in Eurobonds, which is due in 2029 at a yield of 8.375 per cent in March. However, the yield on the debt has risen to around 13.57 per cent, depicting the risk associated with the country’s debt.
