Federal Government of Nigeria to Float $100m Diaspora Bond in 2013

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The Federal Government of Nigeria has unveiled plans for a $100 million Diaspora bond as part of a fresh $500m bond that would be issued sometime next year. The government had early last year issued $500 million Eurobond to investors, which was over-subscribed.  Also, the government assured stakeholders that it was still working on the modalities for the forbearance for stockbrokers, in respect of margin loans, as part of efforts to enable the stock market fully recover, following its near collapse in 2008.

 

Last November, the government announced the approval of debt forbearance for stockbrokers, who got their fingers burnt owing to the crisis that rocked the stock market. The margin loans to the stockbrokers stood at over N400 billion, which is part of the N800 billion total exposure of the nation’s commercial banks to the stock market.  The Coordinating Minister of the Economy and Finance Minister, Dr. Ngozi Okonjo-Iweala, spoke recently in Arusha, Tanzania, at a debate tagged: ‘Africa Transforming Africa’ organised by Africa Finance Corporation (AFC) at the annual meetings of the African Development Bank (AfDB), that the government was working closely with the World Bank on the Diaspora bond.  “We are working on a Diaspora bond with a large and generous definition of Diaspora, to make sure we succeed. We will work on it, it will take some time, because it takes a little more work, by next year, we will be able to do something. We are working closely with the World Bank. “I will be very modest; we will do a bond, a section of which will be a Diaspora bond. May be we will still $100 million mark, because this is the first but it will part of a bigger bond. Let’s say we go for $500 million like our last Euro bond, we might decide to dedicate $100 million of that to Diaspora Bond and the remaining to the normal bond issuance,” she said. Okonjo-Iweala stated that remittances by Nigerians in Diaspora were so enormous that such needed to be harnessed for the development of the country, recalling that a World Bank study had put the remittances figure at $10 billion.

 

“Nigeria has a huge Diaspora. According the World Bank studies, Nigeria has about $10 billion in remittances recorded and unrecorded. Even if its $6 billion, it’s still a large number. The question is, it’s coming in, and it’s helping a lot in the rural areas.

“If you go to some areas, every other person’s somebody is in the Diaspora. How do you incentivise it? That’s something we could think about. We can also think of doing instruments to securitise it, to manage this fund better”, she added.  On the specific projects on which proceeds of the bond will be applied, Okonjo-Iweala said discussions with the Nigerians in the Diaspora would determine the projects that would be the beneficiaries.  “Let us discuss with the Diaspora to see what they will want their funds to be invested in. I don’t want to get ahead of myself. But you know, it must be in concrete projects that they can see, that is my belief. Then they will be more excited if they see that a particular project will be delivered.  “We are going to have conversation with them; we are already launching it, to see what they have in mind. You know the level of trust is also not that high. You must in something that people can believe in,” she said.

However, the finance minister assured that government would implement the forbearance but was only being careful not to create a situation whereby those unaffected would complain that the government was unduly favouring those affected.  According to her, “We are working on the forbearance, we’ve agreed on it. We are going to implement it. We’ve been have been discussions on how to deal with it. We must remember that we don’t want any moral hazard. We don’t want all those stockbrokers who did the right doing that they are not appreciated and have been neglected.

“So we must honour them too by looking at the type of forbearance that will be accorded to the stockbrokers that are having difficulties. There will be forbearance but there will some conditions attached to that,” the minister added.

 

 

Source: This day