NIGERIA'S LOVE FOR EUROBOND AND THE DISASTER AHEAD

Obviously, under President M Buhari, Nigeria has fallen in love with Euro bond. And why not when local cost of funds is very much more than euro cost of funds?

But there also lies the disaster ahead: the Nigeria that is in love currently with eurobond is led by a President and regime more in love with populist and none directly productive militarilsation and so, could waste relief received yet saddle the future with avoidable burden.

Nigeria's first eurobond was issued in 2011 and two years passed before another was issued in 2013. Between then and Buhari's regime, none else was issued.

Now, four years after, Buhari regime issued not just one but two in 2017. Not yet satiated, another global medium tern note programme now on in two tranches to raise total of $2.50 bn this month of February.

The love affair has good logic behind it on the surface. Government says that local cost of funds and by implication debt burden from money owed locally by the government is so high now that it is cheaper and more attractive to borrow from the world through Europe to immediately repay the local debts.

The logic remains sound because for one, it will result in medium term, as against short term foreign exchange.

For another, it will result in immediate relief for government in the form of any differential between the total cost of servicing the euro bonds and local debts 

For a third reason it help boost local liquidity especially of debts like unpaid and outstanding  subsidy payments; contractors monies and local bonds due instead of being rolled over.

But then, the other side of the coin presents  the main challenge associated with foreign debts: It has to be serviced in foreign currency before it matures and come 2030 and 2038 in the case of the ongoing issues, when it is time to repay.

That is in the near future, when the immediate relief from the bonds have been enjoyed, it will be time to service and repay in hard currency. Will Nigeria be in a position to?

Some how, the answer is bound to be no, because the Buhari presidency does not look like one that can lay the foundations needed for Nigeria to continue to earn foreign exchange as crude oil and gas reserves dry up.

Presently, the President and his team are more concerned with funding military and paramilitary operations to quell even insurgency that its own action and inaction help encourage; to spend billions purportedly feeding primarily school pupils to boost healthier childhood and learning across the land; to run bloated government and cover up corruption in its ranks; to fund ego boosting projects like the rail line to Niger and also looks set to copy past use of public funds to run private political campaigns and ambitions.

None of these augur well for the prudence and financial responsibility that will engender judicious use of the relief from the eurobonds.

Indeed, arm the military with best available weapons; vote more billions to feed pupils and even distribute free to unemployed youths; run scared of trimming government and its workforce; and more if you like; the point is without effective plans for non oil and gas foreign inflow, only one thing looks likely in the near future: Nigeria will be forced to say we can't pay and won't pay.

Decoded: Should that happen, let us not forget that the foundation is being laid now as Nigeria under Buhari mortgages the future for the pleasures and political sense of the moment.

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