Yields on Nigerian short-dated debt decline by around 50 percent on Tuesday after the government announced pricing for $2.5 billion Eurobond meant to repay maturing treasury bills.
Investors are expected repayment of around 198 billion naira in maturing treasury bills as soon as the government is through with the Eurobond issuance process.
Once the government refinances its maturing debt with the proceeds of the Eurobond, the volume of treasury for the next quarter is expected to drop.
Since last year, Finance minister Kemi Adeosun had announced government intention to refinance domestic debt with the foreign bond in order to cost of debt services.
The government has been working to lower its borrowing costs, particularly as inflation fell for the 12th time in a row in January.
By November last year, the government paid off the maturing bills rather than rolling them over as it has done in the past.
Head of the Debt Mangement Office (DMO), Patience Oniha said the issuance of the $2.5 billion in Eurobond will enable Nigeria refinance a portion of its existing domestic debt portfolio, with external debt at considerably lower cost.
According to her, the impact of the process has already led to a reduction in the cost of domestic borrowing, and so a double benefit for the cost of our broader debt portfolio. Lower domestic rates will also benefit corporate borrowers.
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