Nigeria Considers Panda Bonds to Help Plug Record Budget Gapby
May follow South Korea in selling yuan debt in China
Africa's largest economy looking at cheapest funding sources
Nigeria may become only the second nation after South Korea to sell yuan-denominated debt in China’s domestic market as it seeks to cut borrowing costs while plugging a record record budget deficit.
The West African nation may shun the Eurobond market, opting instead for renminbi or yen bonds, according to Finance Minister Kemi Adeosun. The government wants to raise as much as $1 billion in international capital markets to finance a deficit that’s forecast to be about 2.2 trillion naira ($11.1 billion) this year, she said April 9.
“We are finding that, indicatively, the renminbi market may be cheaper than the Eurobond market,” Adeosun told reporters in Lagos, the commercial capital. “We are shopping around for the best deals.”
Adeosun, appointed by President Muhammadu Buhari in November, is in Washington this week to negotiate a $1 billion-loan from the World Bank, which should be completed by the end of June and would also help fill the country’s funding gap, she said.
Nigeria has only sold dollar bonds on the international markets previously. Yields on its $500 million notes due in July 2023 rose two basis points to 7.93 percent by 11:52 a.m. in Lagos on Monday. They have fallen from a peak of 9.37 percent on Jan. 15.
Buhari still has to sign off on the 6.1 trillion-naira 2016 budget before Nigeria can issue foreign debt, Adeosun said. Meetings with Eurobond investors planned for last month never took place.
While Adeosun said that Nigeria is considering so-called panda bonds, which are yuan-denominated and sold to investors on the Chinese mainland, she didn’t say if that ruled out a dim sum bond, which is also yuan-denominated but sold to offshore investors. South Korea is the only country to have issued a panda bond.