The Federal Government has announced plans to initiate the issuance of domestic bonds denominated in foreign currency in the second quarter of this year, precisely in the month of June.
According to a Reuters report, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, made this announcement during a meeting with business leaders in Lagos.
The move came amidst plans by the government to attract additional foreign exchange inflows in order to stabilise its currency.
The Nigerian economy has grappled with shortages of US dollars, leading to a significant depreciation of the naira currency.
But with the new foreign exchange reforms pursued by the Central Bank and the Federal government, the naira has in the last two months gained ground against the United States dollars, currently exchanging at N1,255/$.
Edun at the meeting told the business leaders that the government would seek to sell forex bonds to Nigerians at home and abroad who, “because of lack of faith in the currency, have decided to try to hold and save in dollars.”
He added, “All the funds in the diaspora, we are targeting them. There are all these funds that you have brought into your (local foreign currency) accounts, we are targeting them.”
“When they say what keeps you awake at night, I will say paying the debt service (cost).” .
He clarified that the government delayed issuing bonds in order to establish confidence in its fiscal policy and win over investors and skeptical citizens.
President Bola Tinubu issued executive orders last October, allowing for the domestic issuance of financial instruments in foreign currency and permitting the inflow of all cash held outside the formal banking system into the banks.
This latest pronouncement is the second time the government has stated its desire to allow domestic issuance of financial instruments.
At a press briefing last year, the co-ordinating minister of the economy said the government was going to consider alternative means of raising funds as it could not keep depending on borrowing.
According to the minister, the current administration is looking to attract funds held in domiciliary accounts and funds held by Nigerians abroad into massive investments in various sectors of the economy.
He said that Nigerians had huge funds in domiciliary accounts and held large sums abroad, which could be deployed to rejuvenate the economy and that his team was working to provide the needed environment to attract such funds into the Nigerian economy.
He said Nigerians in the Diaspora were also expected to play a significant role in the fresh move to take the economy to a position of high growth, through productivity and efficient management of resources.
He said, “But what we can see is that really, there are quite substantial sources of foreign exchange in Nigeria. There is a lot of cash outside the system, which if brought into the system, increases the money supply of dollars, increases in reserves, and so forth.
“There are funds in domiciliary accounts, which if you give people the incentives, they will utilise those for investment in Nigeria.”
Nigeria has been grappling with a decline in oil production attributed to pipeline vandalism, crude theft, and insufficient investment
Consequently, the government has turned to debt to cover the deficit, resulting in a total government debt of $108bn by the close of 2023.
Currently, approximately 78 per cent of Nigeria’s revenue goes toward servicing this debt, but the government aims to reduce this burden to around 50 per cent.