George Nwangwu
ABSTRACT
Government external borrowing is no new phenomenon in Africa. Many African countries, including Nigeria, often explore external financing whether to fund domestic projects or out of a need for foreign currency. In fact, Nigeria’s debt history with the World Bank and the International Monetary Fund is common knowledge. However, in addition to loans, governments also adopt instruments such as bonds to raise capital in the international capital market. One of such instruments is the Eurobond. The Eurobond is a type of bond sold to investors in domestic markets outside the country of the currency in which the bond is denominated. In Nigeria, the Eurobond has become a major instrument of external borrowing accounting for up to one-third of Nigeria’s total external debt. Since its adoption by the federal government, many private organisations have also followed suit. The Eurobond is simpler when compared with other instruments, due to the absence of strict regulation. However, despite its attractions, the increasing use of the Eurobond raises several economic implications for the country. With relatively simpler conditions, the frequent use of the Eurobond is increasing the country’s external exposure at a rapid pace. This article provides an overview of the Eurobond, its key features as well as its application in Nigeria. It further discusses the attractions to and identifies legal issues in connection with the Eurobond. Finally, this article presents economic implications of the increased use of the Eurobonds and recommends alternative options of financing.
Keywords: EuroBond; Utility; Global Debt; Government, Nigeria.