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Four
firms have been selected to act as financial and legal advisers for
Nigeria’s $500 million Eurobond, scheduled to open before year end.

Abraham
Nwankwo, director general of the Debt Management Office (DMO), said
Barclays Capital, a leading global British investment bank, and FBN
Capital, a subsidiary of First Bank of Nigeria, have been selected as
financial advisers; while White & Case, a United States of
America-based international law firm, and Banwo & Ighodalo, a
Lagos-based commercial law firm, have been selected as legal advisers
for the bond.

Mr.
Nwankwo added that despite the downgrade by Fitch Rating, Nigeria will
successfully raise the amount from the international bond market due to
the confidence level of potential investors in the Nigerian economy.

Debut Eurobond

Mr.
Nwankwo explained that Nigeria was making her debut in order to
establish her presence at the international financial market, as well
as create a benchmark yield curve by which other debt instruments in
the country can be measured.

Speaking
at a media briefing yesterday in Lagos, the director general said
Nigeria’s total debt profile is still within sustainable level. He said
the Federal Government has taken a decision to ensure that Nigeria’s
debt does not exceed the 25 percent debt to GDP (Gross Domestic
Product) threshold.

“Nigeria’s
debt to GDPO ratio is about 16 percent of GDP, even though the
internationally acceptable level is 40 percent of GDP,” he said.

This
was affirmed by Standard & Poor’s credit analyst Christian Esters,
who says that Nigeria has a strong fiscal debt position, despite the
sharp deterioration in budgetary performance since 2009.

“As
measured by narrow net external debt, Nigeria is in a net creditor
position. This is the result of strong current account surpluses over
the past few years, as well as the reduction in gross public sector
external debt,” Mr. Esters said in his ratings report on Nigeria,
released yesterday.

Sustainability

Mr. Esters said debt sustainability is dependent on the GDP size.

“If
your GDP is growing, you can be borrowing more, and yet your debt to
GDP ratio is going down. It is the GDP that determines the capacity of
your consumption and shows that your economy is growing.

“If
we can grow economy every year, our debt to GDP ratio can even drop to
less than 10 percent even if we are still borrowing, because it means
you have more capacity to carry that debt very comfortably,” he added.

The
World Bank recently cautioned Nigeria over her rising domestic debt,
which currently stands at about N3 trillion ($21.8 billion), while
external debt stands at about N645 billion ($4.3 billion).

Mr. Nwankwo insisted that Nigeria’s debt portfolio was being managed efficiently, as the cost of servicing it was minimal.

“Even
though we are borrowing at concessionary source externally, with
maximum charge of 1.25 percent per annum and over 35 percent of your
external debts are concessionary, how can somebody say that we are
paying high interest?” he asked.

He said it was not proper for states to access funds from the bond market and divert such funds to other ventures.

“Nobody can raise money from the domestic capital market without the
approval of Securities and Exchange Commission. SEC is supposed to look
out for investors by making sure that the proceeds from that bond are
really invested in the projects which were declared in the prospectus,”
he said.