Nigerian Finance Minister Kemi Adeosun plans to travel to China next week,<\/p>\n
aiming to negotiate a loan of up to $2 billion to help fund record budget
\nspending, financial and government sources said on Wednesday.<\/p>\n
They also said Nigeria – which is suffering its worst economic crisis for
\ndecades – has shelved plans to meet investors about returning to
\ncommercial borrowing on the Eurobond market.<\/p>\n
One Nigerian government official told Reuters that any loan agreed during
\nAdeosun’s trip could be signed by President Muhammadu Buhari in Beijing
\nnext month.<\/p>\n
“The finance minister, in the company of the central bank governor, is
\nscheduled to be in China sometime next week to conclude negotiations on
\nthe $2 billion loan,” said the official, who asked not to be named.<\/p>\n
With China largely closed for the Lunar New Holiday, it is unclear how
\nkeen Beijing is on the idea, or how tough a bargain it might demand.<\/p>\n
The official acknowledged negotiations had been underway for some time and
\nthat the terms had yet to be agreed. However, he added: “Hopefully it may
\nbe sorted out during this meeting and the loan will be signed during
\nPresident Buhari’s visit to China in March this year.”<\/p>\n
The central bank could not confirm whether Governor Godwin Emefiel would
\nbe joining Adeosun.<\/p>\n
Nigeria wants to raise about $5 billion abroad to cover part of its 2016
\nbudget deficit. This is projected to hit 3 trillion naira ($15 billion)
\ndue to heavy infrastructure spending at a time when the slump in global
\noil prices has slashed it export revenues.<\/p>\n
Buhari, who was elected in March 2015 on a promise to fix the West African
\ncountry, wants to turn around the economy by investing in power plants and
\ntransport, ending a development paralysis under his predecessor Goodluck
\nJonathan.<\/p>\n
The president asked China in December to fund rail and power projects and
\nAdeosun, who already visited Beijing last week, has raised the possibility
\nof seeking a loan from the Export-Import Bank of China.<\/p>\n
NO ROAD SHOW<\/p>\n
Nigeria had wanted to raise $1 billion from Eurobond investors but has
\ndropped plans to sound them out at a non-deal “road show” which the
\nfinance ministry had tentatively planned for March, financial sources say.<\/p>\n
“They will wait a bit with a road show as they wouldn’t be able to get a
\ngood deal,” said one source familiar with the finance ministry plans.<\/p>\n
With world markets in turmoil, investors are wary of lending to anything
\nbut highly-rated rate emerging economies. Nigeria’s reluctance to devalue
\nthe naira currency, which has plunged on the black market, would further
\ndiscourage investors, meaning the cost of commercial borrowing would be
\nprohibitive.<\/p>\n
That puts pressure on Africa’s biggest economy and top oil producer to
\nborrow more from other sources such as China. Nigeria had up to now
\nplanned to raise around $4 billion at concessionary interest rates from
\nsources such as the World Bank.<\/p>\n
While the government official foresaw a $2 billion China loan, a financial
\nsource put the amount at more than $1 billion. The finance ministry could
\nnot be immediately reached for comment.
\nAdeosun has said Abuja has held “explanatory talks” with the World Bank.
\nIt has also asked the African Development Bank for a $1 billion budget
\nsupport loan.<\/p>\n
A World Bank loan would probably be tied to specific goals with strings
\nattached. As well as infrastructure projects, Nigeria also wants loans to
\nrefinance existing debt, one financial source said – an idea that would be
\nhard to sell to the World Bank or other development-focused lenders.<\/p>\n
The World Bank has confirmed talks have been held on “Development Policy
\nOperation” funding, which typically aims to improve infrastructure and
\ncreate jobs. The multilateral lender has been studying projects to fight
\npoverty in northern Nigeria, where the jihadist Boko Haram group is waging
\nan insurgency.<\/p>\n
FREEING THE NAIRA<\/p>\n
If talks with China or multilateral agencies fail, Nigeria would struggle
\nto find willing commercial lenders.<\/p>\n
“It’s going to be difficult for issuers to come to market now unless they
\nare at the high end of the credit quality spectrum,” said Zsolt Papp,
\nclient portfolio manager at JPMorgan Asset Management.<\/p>\n
Reflecting the higher risks as Nigeria struggles with sharply reduced oil
\nrevenue, the average yield spread on its sovereign dollar bonds \u2013 the
\npremium investors demand to hold them over U.S. Treasuries \u2013 has climbed
\nto 713 basis points.<\/p>\n
That is a rise of 100 basis points since the start of last month and more
\nthan double levels a year ago, according to the EMBI Global emerging debt
\nindex. Nigeria’s 2023 bond issued in 2013 with a coupon of 6.37 percent is
\nnow yielding almost 9 percent.<\/p>\n
To excite buyers, Nigeria would have to devalue or float the naira.
\nInvestors believe its overvaluation is delaying economic recovery
\nespecially as other oil exporters from Russia and Angola to Colombia have
\ndevalued their currencies significantly in the past 12 to 18 months.<\/p>\n
The Nigerian currency hit a new low this week on the black market where a
\ndollar fetched 318 naira, compared with the official rate of 197.<\/p>\n
“The policy response in Nigeria has been very slow with respect to the
\ncurrency,” said Claudia Calich, head of emerging debt at M&G Investments
\nin London. “If you look at Angola they have allowed the currency to
\ndevalue quite a bit so the rate of potential deterioration in Nigeria in
\nfuture might be higher.”<\/p>\n
Reuters<\/p>\n","protected":false},"excerpt":{"rendered":"
Nigerian Finance Minister Kemi Adeosun plans to travel to China next week, aiming to negotiate a loan of up to $2 billion to help fund record budget spending, financial and…<\/p>\n","protected":false},"author":1,"featured_media":45676,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[17],"tags":[],"class_list":["post-46412","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-exclusive"],"yoast_head":"\n