The proposed tapping into Eurobond by the Federal Government to finance gas infrastructure, in a renewed focus to grow the nation’s gas sector, has been considered as timely in view of the current favourable positive outlook on Nigeria that has made her debt instruments attractive.
Besides, the soaring foreign reserves, reduced risk premium and lower yield expectations have made it cheaper for the government to borrow from international bond market than borrow locally, thereby fast tracking infrastructure development.
The development will make Nigeria join other African countries like Zambia and Morocco, which tapped global capital markets in 2012 and generated substantial investors’ demand and certainly minimised their external funding cost.
Diezani Alison-Madueke, Minister of Petroleum Resources, while providing insight into Nigeria’s plans for developing its oil and gas sector in the next five years at the 13th Nigerian Oil and Gas (NOG) Conference in Abuja last week, said Nigeria will for the first time tap into Eurobond to finance gas infrastructure in the country.
Indeed, Nigeria is said to have began a renewed focus in the nation’s gas sector with a target of 40 million metric tons by 2030.
Eurobond is an international bond that is denominated in a currency not native to the country where it is issued. It is also called external bonds. London is one of the centres of the Eurobond market. However, Eurobonds may be traded throughout the world.
It’s the first time the option is being explored for the oil and gas sector and for heavy duty, major infrastructure pipelines. Funding of major infrastructure initiatives for gas infrastructure has been through appropriation, which is not sustainable.
Johnson Chukwu, managing director and chief executive officer, Cowry Asset Management Limited, said government’s decision is informed by good showing of Eurobond at the international market, adding, “Access to foreign long-term credits at relatively low interest rates will help Nigeria fast track infrastructure development particularly if such funds are invested in critical infrastructure such as gas transport, standard gauge rail lines, highways, power transmission grids, etc., which can catalyse economic and social development of the country.”