Nigeria to repay $500 million Eurobond debt this July

Nigeria is to redeem a $500 million Eurobond this month (July) as the country continues to battle multiple economic challenges.

Data from the Debt Management Office (DMO) indicate a $500 million Eurobond loan is due for repayment this month in line with its terms.

The bond was obtained 5 years ago at a coupon rate of 6.375% per annum. Nairametrics understands Nigeria may have repaid the bond or has lined up the funds already.

Eurobond debts are typically paid out of the country’s external reserves or via a special fund designated for external bond repayments.

The external reserves have fallen by about $3 billion this year as crude oil sales continue to dwindle. There has also been a paucity of attracting foreign portfolio investments, further impacting cash flow.

However, the country’s ability to repay the debt was never in doubt despite the reduction in reserves.

This is also not the first time Nigeria is repaying a Eurobond following the 2018 and 2021 and 2022 repayments. Last year the country repaid $300 million and in 2021 it repaid $500 million.

Nigeria continues to operate a zero percent default rate at a time when fellow sub-Saharan countries like Ghana have defaulted and renegotiated loan terms.

The country’s ability to service the debt could also be related to the staggered spread of the repayments which makes it compatible with the country’s cash flow.

What does this mean for Nigeria’s future access to international capital markets?

It means that Nigeria has a strong reputation as a reliable borrower, and can attract more investors who are willing to lend at lower interest rates.
This will enable Nigeria to finance its development projects and diversify its economy away from oil dependence.

Nigeria’s successful repayment of its Eurobond loans also sends a positive signal to other African countries that they can overcome their debt challenges with prudent fiscal management and economic reforms.
More repayments – The next Eurobond payment for Nigeria is due in November 2025 and will require a repayment of about $1.1 billion while two years later a $1.5 billion loan falls due.

While this gives the Tinubu administration a cash flow breather it still portends an economic challenge in the coming years if the country does not sort out its debt challenges.

Nairametrics recently reported total public debt rose by fiat to N82 trillion following the unification of the naira. It was N73 trillion before the unification.

Nigeria’s total Eurobond obligation is estimated at about $10.7 billion and with different maturities. Naira-denominated debts are about N53 trillion half of which is the central bank’s Ways and Means loan extension to the government.

Experts opine the country is unlikely to seek further Eurobonds and global economic conditions for foreign currency borrowings remain challenging.