Nigeria to Refinance $1.12 bn Eurobonds Expiring in November
LAGOS, NIGERIA: Nigeria is poised to replace its $1.118 billion sovereign Eurobond due to settlement in November as the lawmakers approve $2.85 billion in external borrowing for President Bola Tinubu.
Without refinancing, the government will be obligated to settle foreign investors with approximately $1.2 billion, which could shake the nation’s external reserve balance significantly and undo the naira rally.
Some analysts said the refinance borrowing note will probably attract lower rates considering the country’s improving macroeconomic indicators and global central bank monetary easing traction.
“You cannot rule out foreign investors’ sentiment about the country risks – but then, the fact that all ratings agencies have upgraded Nigeria’s credit ratings would be an added advantage,” a senior economist said in a chat.
Amidst the US Federal Reserve rate cut, the authority will be visiting the global market to raise about $3 billion, including a sovereign Sukuk, as part of borrowing portfolio diversification.
Nigerian Government plans to use $2.347 billion to fund 2025 budget deficit with a plan to refinance $1.118 billion Eurobonds that will expire next month.
This week, Nigeria’s House of Representatives has cleared President Tinubu’s request to borrow $2.85 billion from international investors. This forms part of the 2025 budget financing plan.
In a commentary note, Oluwadamilare Oladeji Chief Investment Officer at Erad Partners Limited said November 2025 bond maturity is being rolled over, not paid out of reserves as this keeps FX buffers stable and signals fiscal discipline.
On the lawmaker’s approval, Oladeji explained that the decision aligns with the Debt Management Office (DMO) borrowing plans and positions Nigeria early before market conditions tighten, noting the current Fed easing cycle.
The market anticipates Nigeria interest rate on external borrowing will be reduced due to significant improvement in the country’s macroeconomic indicators and track record of zero default.
Erad Partners Limited acknowledged that investor confidence has improved on the back of reforms on FX liberalisation, subsidy removal, and a more orthodox Central Bank.
Reacting to a question about rates on the expiring Eurobond and current market conditions, Oladeji said refinancing through markets reduces near-term rollover risk, and he noted that it is a positive signal for existing bondholders.
“… Settlement would involve using the reserves to pay down the loan. Refinancing, on the other hand, could be cheaper if market conditions remain favourable.
“As global central banks are embarking on an easing cycle coupled with positive fundamentals around FX, monetary policy and removal from the grey list make Nigeria a better investment proposition.
The Nigerian lawmakers’ approval suggests increased Eurobond supply is coming over the next few weeks. Oladeji anticipates a 5 to 15 year issue plus a $500 million Sukuk is expected to be launch in the latter part of the year.
He stated that successfully issuing a global Sukuk will diversify Nigeria’s funding sources and attract a new class of investors. On the downside, the additional loan is expected to increase external debt, meaning higher FX debt service costs if revenues remain lacklustre. OMO, T-Bills Yields Fall Over Rising Demand for Naira Assets
