Tie Eurobond Proceeds To Dev Projects – Don Advises

Associate Professor, Banking Department, Nasarawa State University, Lafia, Dr Uche Uwaleke, has said that the nation’s one billion dollar eurobond raised at the international capital market should be tied to developmental projects.
Uwaleke made the call while delivering a paper on “Enhancing domestic productions as a panacea for growth and foreign exchange conservation,’’ at the  ongoing seminar for finance correspondents and business editors on Tuesday in Sokoto.
The theme of the seminar is, “Monetary Policy in a Period of Economic Uncertainty”.
He said that funds raised from the Eurobond, when tied to projects, could be self-liquidated and should not be tied to social budgets or consumed by paying salaries.
The associate professor, however, said that such projects should generate higher returns than the rate of borrowing at the international market.
Uweleke said, “So, there is need to be concerned about the timing of the borrowing and its cost.
“But what should be paramount is that such borrowing should be tied to projects. It should not be used for concurrent expenditure.
“If you are borrowing at 7.8 per cent, it does make sense that the projects you are executing should generate higher returns than the rate you borrowed.”
He noted that the nation should have considered the timing before engaging in borrowing from the international capital market because of recession.
“We should have waited to come out of recession, get some positive international ratings and then go for borrowing.
“Notwithstanding, we may also borrow from the International Monetary Fund and the World Bank but at concessional windows.
“But we would be tied to conditions,” he added.
The economists said that the oversubscription of the nation’s eurobond at the international market showed a regained confidence in the Nigeria economy.
Uwaleke attributed the oversubscription to the bonds to the fact that it was cheaper, being with the highest yield return in sub-Saharan Africa.
“Investors responded very well because the return gave them high yield on their investment than any other,’’ he noted.