FG LAUNCHES PRE-OFFER ROADSHOW FOR N100 BILLION SUKUK

The Debt Management Office, DMO, today kicked off activities preparatory to the Issuance of the much awaited N100 billion non-interest bearing bond popularly called Sukuk.

 A National Roadshow  led by the Director-General of the DMO, Ms. Patience Oniha, commenced on Thursday, and will visit major cities in Nigeria including, Kano, Kaduna, Lagos and Port Harcourt. The Team will be accompanied by its Financial Advisers, Lotus Capital Financial Services Limited and FBN Merchant Bank Plc.

 The Roadshow is to create awareness about the Sovereign Sukuk and sensitize target investors about the features and benefits of the Sovereign Sukuk.

 The DMO had announced its intention to issue a Sovereign Sukuk in the domestic market as part of measures to fund the 2017 budget deficit.

 Apart from serving as alternative source of funding for the Government, the Sukuk will also serve to diversify the investor base for FGN Securities, promote financial inclusion and deepen the domestic capital market.

 Proceeds from the Sukuk Issuance, according to the DMO, will be used to finance specific road projects. Sukuk are asset-based securities, not debt instruments, and represents ownership in a tangible asset, service, project, business or joint venture.

 This is why Sukuk fits into the DMO debt strategy of borrowing to finance capital projects contained in the budget.

 This ensures that Government borrowings are used to finance development projects which have multiple economic and social benefits for citizens.

 The debut Sovereign Sukuk is for N100 billion with a tenor of Seven (7) years, and  has been certified as ethically compliant by the Financial Regulation Advisory Council of Experts of the Central Bank of Nigeria.

 Benefits to be derived from investment in the Sukuk, according the DMO include “safety, regular income which are tax free and liquidity as they will be listed and traded on The Nigerian Stock Exchange and the FMDQ OTC Securities Exchange Plc.”

The product is also useful as collateral to access loans from banks.

 The Offer for Subscription will open in the week after the Roadshow and will be advertised in major newspapers.

 It is expected that the Sukuk will attract huge subscriptions from a wide range of institutional and retail investors including fund managers, associations and groups. 

To make it accessible to a wide spectrum of Nigerians, the minimum amount that an investor can purchase has been fixed at N10,000.00 only. Potential investors are advised to visit www.dmo.gov.ng

 

 

DMO SOLICITS MEDIA IN DEBT MANAGEMENT

The Director General of the Debt Management Office (DMO), Ms. Patience Oniha, has solicited the support of the media in informing Nigerians on the management of the country’s debt stock and government’s drive towards infrastructural development.
Oniha, who made the call in Lagos weekend when she met some editors, gave the assurance that the DMO will continue to be in the forefront of openness and engagement with the media so that Nigerians will be better informed.
 The DMO boss used the breakfast meeting to explain that her leadership, “will focus on loan repayment and loan utilisation to ensure proper implementation of Nigeria’s budget’’.
 She told the editors that the agency intends to clear debt repayment plans as well as bridge the gap between revenue and expenditure occasioned by drop in global price of crude.
 “For many years, the government had operated a deficit budget aimed at stimulating economic growth, because the revenue was less than expenditure.
 “DMO will support the government to bridge the gap between revenue and expenditure,’’ Oniha said.
 On why the federal government has continued to raise capital from the market, she explained that the focus on capital projects was a deliberate strategy to turn around the economy and boost infrastructural development.
 “That is why government’s focus is on borrowing. We need to upscale things so as to achieve goals of government.”
 Taking questions on why the government was going to refinance Treasury Bill stock with a proposed $3billion foreign loan, the DMO DG said: “As most of you know, the treasury bill notice is in the public domain. Treasury bills are issued for a tenor of 364 days’ maximum and the discount rate is about 18% to government. When you compare that to the rate of six to seven percent in the international market you realize straight away that there is a huge savings of 11 to 12 percent which is what we are trying to take advantage of.
 “It is not a new borrowing so it is not going to increase our debt stock. It is simply converting some of our naira debts to US dollars at a longer tenor and at a lower cost.”
 Remember the point that I made of the benefits of doing that is longer tenor and cheaper rate. By the time that borrowing in U.S dollars is due for repayment, several of the initiatives and policies of government would have materialized so you are not looking at repaying in one or two years. The naira is either stronger at exchange rate or at best remain at the level we have now.”
Most of the editors who spoke at the meeting assured the DG of the support of the media and expressed the hope that they will be frequent engagements so that they could properly inform Nigerians on the activities of the DMO.

FEC APPROVES REFINANCING OF OF DOMESTIC DEBTS BY EXTERNAL BORROWING

The Federal Executive Council has approved the refinancing of part of the country’s domestic debt through external borrowing.

Minister of Finance, Mrs. Kemi Adeosun, who disclosed this after the Federal Executive Council (FEC) meeting, allayed fears of increased borrowing, insisting that instead of borrowing Naira, “we are now borrowing dollars and at a cheaper rate.”

The approval followed a proposal by the Debt Management Office (DMO) for the refinancing of part of the country’s domestic debts, particularly Nigerian Treasury Bills (NTBs), through the borrowing of $3 billion.

The move is informed by the lower US Dollar interest rates in the International Capital Market (ICM), with Nigeria expected to borrow at a rate not higher than 7%, while issuances of the NTBs in the domestic market are at rates as high as 18.53%, which means that external borrowing is cheaper by about  12%. Analysts agree that the implementation of the refinancing will result in substantial cost savings for the FGN in debt service costs.

Besides reducing the cost of borrowing, the $3 billion is expected to be raised for a tenor of up to 15 years, which is very long compared to the maximum tenor of 364 days for NTBs. This move will effectively extend the tenor of the government’s debt portfolio. The longer tenor enables the Government to repay at a time when the economy would be stronger and more diversified, to meet the obligations.

The reduction in the level of the FGN’s borrowing from the domestic market would result in a reduction in domestic interest rates and free up borrowing space in the economy, particularly for private sector borrowers.

The $3billion from the refinancing will also represent an injection of foreign exchange into the economy which will boost the country’s external reserves.

The approval of the National Assembly will be obtained for the proposed refinancing before implementation in line with the Debt Management Office, Act 2003.