Nigeria to refinance $3bn worth of T-bills with dollar debt

Nigeria plans to refinance $3 billion worth of treasury bills denominated in the local currency with dollar borrowing to lower costs and improve its debt position, the finance minister said on Wednesday, as Africa’s top economy recovers from a recession.
Minister of Finance, Mrs Kemi Adeosun announced the shift after a cabinet meeting in which the spending plan for 2018-2020 was approved. Budget minister Udoma Udo Udoma told the same news conference that the government’s economic growth projection for next year had been revised down to 3.5 percent from 4.8 percent.
Dollars have been in short supply in Nigeria since the price of crude oil, the main source of hard currency, plunged in mid-2014, triggering a currency crisis, an exodus of foreign investors and its first recession in 25 years.
Adeosun said the government planned to refinance $3 billion worth of maturing naira-denominated short-term treasury bills with dollar borrowing of up to three years’ maturity.
She said it was part of an attempt to restructure the debt portfolio into longer term maturities by borrowing more offshore and less at home, which the minister said would also support private sector access to credit to boost the economy.
“As the economy recovers and grows we will be in a much better position to repay instead of just rolling over the debt,” Adeosun said.
She said the government would issue dollar debt as $3 billion worth of naira treasury bills gradually mature. She did not provide a time frame for this.
A view of the central business district is seen from a roof-top in Lagos, Nigeria February 10, 2016.Akintunde Akinleye
Nigeria expects a shortfall of $7.5 billion in its 2017 budget. The government plans to raise around half of that in foreign loans, including from the World Bank and from international debt markets.
“We are not increasing our borrowings, we are simply restructuring — instead of owing naira, we will be owing dollars,” Adeosun said.
The OPEC member, which relies on crude sales for two-thirds of government revenue, has at least six exchange rates which it has used to mask pressure on the naira during the currency crisis caused by low oil prices.
The finance minister said the debt profile change would have a positive impact on the value of the naira “because it means that $3 billion will be coming into our foreign reserve”.
Also briefing reporters, budget minister Udoma said the government had approved “a slightly different” growth trajectory of 3.5 percent for next year, down from 4.8 percent it announced last week in its strategy paper.
He did not provide an explanation for why the growth forecast had been revised down.
Udoma forecast growth would top 4.5 percent by 2019 and 7 percent by 2020, adding that the government was projecting crude production of 2.3 million barrels per day for next year at a price of $45 a barrel.