Creditors Ignore Nigerian Gov’t’s Loan Request After Buhari Sought Debt Cancellation

Creditors snubbed the Federal government of Nigeria in the capital market after the Nigerian government tried to raise N225 billion loan through bond issuance in October.

This will affect the financial capacity of the Federal Government to fund the N20.51 trillion-2023 budget which has a deficit of N10.78 trillion. 

Prime Business Africa (PBA) had reported that President Muhammadu Buhari plans to borrow about N9.32 trillion. The administration will raise N7.4 trillion debt from domestic creditors, and N1.8 trillion from foreign creditors. 

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President Buhari’s administration planned to borrow N225 billion through bonds from creditors this month. It, however, failed to record impressive subscription from investors. 

Unlike other bonds that were oversubscribed, the Federal Government could only generate N107.88 billion from the October bond, falling short of N117 billion, Prime Business Africa gathered from the latest Debt Management Office (DMO) data.

In previous bond listing, President Buhari’s administration had recorded oversubscription. But, with reports of the Nigerian government seeking debt forgiveness and requesting for debt restructuring, investor confidence towards Nigeria has dropped. 

PBA understands that seeking debt cancellation or loan restructuring is seen as a country having weak financial capability to meet debt obligations. It causes creditors to lose money or experience delay in repayment of the debt. 

As such, creditors or investors avoid providing money to such country in a bid to protect their investments, and often prefer to put their money elsewhere that debt forgiveness or debt restructuring will not be requested.