Finance Minister, Okonjo-Iweala
Her words, “I can tell you, as someone who was involved in the debt cancellation under the President Olusegun Obasanjo’s government; who actually spear-headed the discussion, I will be the last person, and President Goodluck Jonathan will be the last person to subscribe to a situation in which we would pile up debts. We watch those indicators like hawks.
“The president is very clear on this issue. So what are we doing to ensure that the debt does not go out of hand? We monitor those issues. The norm internationally is that it should not exceed 60 per cent of the GDP. In Nigeria, we have adopted 30 per cent, half of the international standard because we want to be really careful.
“We are very prudent about it. The only area we are also closely monitoring is our internal debt. We do not want domestic debt to keep growing because interest rates are so high in Nigeria. Right now the federal government is floating bonds that are anywhere between 15 and 17 per cent.
That is a very high rate because it means that interests will be multiplying it. So we want to diminish the amount of borrowing domestically as well. We are bringing it down from budget 2011 -2012. You saw that we brought it down from N852 billion last year to N794 billion this year and we will continue to reduce it in the years ahead so that we don’t accumulate too much interest on domestic debt.
“So as of now, our debt/GPD ratio is about 20 per cent, well below- and the $ 7.9 billion of external borrowing is over three years, not one year and at the end of that, given the GPD growth rate that we have, we are still going to have a debt/GDP ration of around 20 per cent or so. 20 or 21 per cent is not going to be much because our GDP is growing.”
She explained that she was watching the nation’s debt portfolio like a hawk and will never allow it to exceed the 30 per cent of the GDP ratio which the nation had set for itself, as said that the nation could not afford to return to a fresh debt burden after leading her out of the Paris Debt burden of over $30 billion in 2005.
Okonjo-Iweala’s team has briefed London-based investors and their counterparts in Zurich, Switzerland’s business hub between Thurdsay and yesterday and will held for China, today.
According to the Minister, the roadshow was critical for the Eurobond which was over subscribed last year, when it was floated, by assuring global investors that the Nigerian economy was making remarkable progressing, by growing at nearly 8 per cent of GDP, Gross Domestic Product, per annum, at a time when most nations of the world, including those of developed nations, were recording downward economic performances.
Commenting on the roadshow, she added, “This roadshow is extremely important because those who have invested in our bonds need to know from time to time, the situation in our country. We have to update them on economic, socio-political and even security developments.
“Given to the fact that there have been some recent events in the country, there have been strong demands by investors in Nigeria’s bond and investors in Nigeria in general, to have meetings with us, to be updated on the situation in the country. That is why this roadshow is there.
“We are not floating a new bond yet but those who invested in the 500 million Eurobond which was put to the market last year, want to be updated on where we stand. It is very important to re-assure the investors and that is what we are doing”.
The minister said that the yield for the Nigerian bond was very reasonable, given what was happening in the Eurozone and the U S A, currently.
Earlier, in his remarks, the Director-General, of the DMO, Dr. Abraham Nwankwo had explained that the road show was to brief international investors and who invested in the Nigerian Eurobond last year and global fund managers on the progress the Nigerian economy has made in the last one year.
According to him, such road shows were part of the agreement between Nigeria and those who invested in the sovereign bond as the latter had demanded periodical briefings by the Nigerian government on the general conditions of the economy.
Nwankwo said that the meeting was critical for both Nigeria and the investors as it would improve the nation’s risk perception by investors, while it would also enable the bond trade favourable to the advantage of those who invested in the bond and its instruments could trade favourably in the international capital market.
His words, “one of the pledges we made to the investors at the point of floating the bonds was that we will continue to update them about the socio-economic and political progress the country is making. This is to achieve a number of objectives: one is that it will enable the bond you have issued in the market to trade at a favourable price.
“As you know we used went to the market to use that issue to establish a benchmark on which the private sector in Nigeria can access the international capital market so it is necessary to make sure that the bond is trading at a favourable price so that when Nigerian corporate approach the market to issue their own bonds, they will be able to issue at a price that is very favourable to them.
“And so to do that you have to continue to update the market about favourable developments in the economy. Even when there are challenges in the economy or in your society, you will be able to tell them what measures are being taking to address such challenges.
“So it improves the perception of the country, economically, politically and socially, therefore influences the interests of investors to invest in your country; it reduces their perception of risks for your country and therefore when a Nigerian corporate comes to the market to issue a bond it will be able to raise money at a relatively favourable price.
“Besides, it is a way to encourage investors to come to Nigeria, not only to lend money to Nigerian corporate organizations or Nigerian government but more importantly to come in with foreign direct investment.”
He stated that based on the yield on the Nigeria Sovereign Eurobond in January, last year, any Nigerian investor that goes to the market now would raise funds at a very good price, which he said was why the federal government officials were meeting international investors and fund managers to acquaint them with the progress Nigerian has been making on various fronts.
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