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Kenya opts for new Eurobond amidst growing debt burden

Published

1 year ago

April 19, 2023

As part of moves to restore its economy, Kenya is planning to issue a new Eurobond to manage 2024’s maturity of a Ksh270 billion ($2 billion) 10-year bond.

The country’s national treasury revealed that it had opted for another Eurobond in a statement on Monday as the country faces the reality of handling the large maturing loan amid highly ballooned debt-servicing costs in recent years, and highly weakened local currency against the US dollar.

“The government of the Republic of Kenya through its national treasury is considering accessing the international capital markets before the end of the fiscal year 2023/24 (July 1, 2023, to June 30, 2024) to issue a sovereign bond,” the Treasury said in a tender call for lead arrangers to express interest in the new Eurobond plans.

The Treasury will also spend Ksh1.36 trillion ($10.07 billion) to service debt in the current financial year, which is 63 percent of the tax revenue targeted for collection by the Kenya Revenue Authority (KRA) by June.

The latest Eurobond will be the first since President Ruto took office in September last year, having announced his first budget of Ksh3.663 trillion for 2023/24.

Kenya issued the bond on June 24, 2014, with a coupon rate of 6.875 percent annually. That is, however, not the only Eurobond that will fall due during Ruto’s first term.

Another Eurobond of Ksh121.5 billion ($899.7 million) will mature on May 22, 2027. The eight-year bond with a coupon rate of seven percent per annum was issued on May 22, 2019.

The other Eurobonds, totaling Ksh567 billion ($4.2 billion), will mature in February 2028, May 2032, January 2034, and February 2048.

Kenya has insisted that it would not default on its debt repayment obligations despite delayed payment of civil service salaries.

The head of the International Monetary Fund’s Africa Department, Abebe Aemro Selassie recently revealed that Kenya was not expected to seek a restructuring of its debt despite current strains and a looming bond payment.

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Nigerian govt denies reports it plans to borrow pension fund for infrastructure

Published

16 hours ago

May 17, 2024

Ifeoluwa Dada

The Nigerian government has denied reports that it plans to borrow the N20tn pension fund to finance infrastructural projects.

In a statement made in Abuja, Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, stated that the government would abide by the laws and guidelines in place pertaining to the pension fund.

Following a two-day Federal Executive Council meeting at the Presidential Villa on Tuesday, the minister reportedly informed reporters that the government would present a plan to use local funds, including the fund, to finance infrastructure development.

Edunstated that the government does not intend to exceed these legal boundaries, emphasising that the government was committed to protecting workers’ pensions.

“It has come to my notice that stories are making the round that the Federal Government plans to illegally access the hard-earned savings and pension contributions of workers. Nothing could be farther from the truth.

“The pension industry, like most the financial industries, is highly regulated. There are rules. There are limitations about what pension money can be invested in and what it cannot be invested in.

“The Federal Government has no intention whatsoever to go beyond those limitations and go outside those bounds which are there to safeguard the pensions of workers.

“What was announced to the Federal Executive Council was that there was an ongoing initiative drawing in all the major stakeholders in the long-term saving industry, those that handle funds that are available over a long period to see how, within the regulations and the laws; these funds could be used maximally to drive investment in key growth areas,” Edun clarified.

The plan to spend the pension fund was reported and was widely criticised. The Trade Union Congress of Nigeria and the Nigeria Labour Congress had earlier on Thursday urged the government to abstain from making any changes to the pension fund.

They stated, “Nigerian workers have entrusted their hard-earned savings for retirement security, not as a means for government projects. It is imperative to halt any further plans to tap into these funds, especially given the lack of transparency and accountability in past government borrowing practices.”

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Nigeria’s inflation hits 28-year high of 33.69% in April

Published

2 days ago

May 16, 2024

Ifeoluwa Dada

Nigeria’s consumer inflation reached a 28-year high of 33.69% in April, up from 33.20% in March, according to statistics agency figures released on Wednesday.

President Bola Tinubu’s administration has slashed petrol and energy subsidies and devalued the local naira currency twice.

To manage pricing pressures, the central bank has hiked interest rates twice this year, including the highest hike in almost 17 years. The central bank governor has stated that rates will remain high for as long as necessary to reduce inflation. The bank will host another rate-setting meeting next week.

When compared to the previous year, the inflation rate in April 2024 was 11.47 percentage points more than in April 2023, when it stood at 22.22 percent. This implies that the headline inflation rate has increased dramatically during the last year.

According to the National Bureau of Statistics, food and nonalcoholic beverages remained the largest contributor to inflation in April. Food inflation, which accounts for most of the inflation basket, rose to 40.53% yearly from 40.01% in March.

Price pressures have left millions of Nigerians facing the biggest cost-of-living crisis in decades, as they fight to satisfy their most basic necessities.

Tinubu has offered a 35% salary increase for state personnel to alleviate pressure on government workers. To assist disadvantaged households, his government has resumed a direct cash transfer program and provided at least 42,000 tons of grains such as corn and millet.