Nigerian government is holding talks with the United Kingdom for support on the issuance of ‘jollof bonds’ for financing of infrastructure in the country.
This comes as government hopes to secure the first tranche of a $3 billion facility from the World Bank, amounting to $750 million, in April 2020.
The proposed World Bank borrowing comes amid concerns of ballooning debt profile for a country which also budgets trillions of naira to subsidise consumption annually.
Zainab Ahmed, finance minister, said government had specially named the instrument ‘jollof bonds’ but it would be issued offshore but denominated in the local currency.
“The importance of such a bond is that it protects the country, the issuer, from exchange rate exposure,” she explained. She was speaking at a press briefing on the outcome of various bilateral meetings held at the annual meetings of the International Monetary Fund (IMF) and the World Bank in Washington, DC.
“We are contemplating such a bond, some countries call their own sala bonds,” Ahmed noted but did not disclose the amount being contemplated.
She said it is another instrument to raise financing for the national budget.
“In the past we have issued euro bonds which have done well but we are considering this option because it could be cheap and even if it is not, it will be more cost effective because we are protected from exchange rate differential risk,” she said.
Ahmed disclosed that proposals have been made to the Nigerian government not just by the UK government but also by Deutsche Bank and now the World Bank.
“One of the bilateral meetings was with the United Kingdom minister of state for international development. We also participated in the UK investment summit to explore further areas of corporation,” she said.
