Nigeria reappoints transaction parties for Eurobond

Timothy Choji, Abuja

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The Federal Executive Council has approved the reappointment of transaction parties for the country’s Eurobond.

Minister of Finance, Kemi Adeosun, disclosed this while briefing State House Correspondents after Wednesday’s meeting of the Council, presided over by President Muhammadu Buhari.

“I presented a memo which was approved, to reappoint transaction parties that are active for us on our Eurobond, and those parties are city group, Standard Chartered, Stanbic IBTC holdings, White & Case, Banwo & Ighodalo and Africa Practice. This is for our Eurobond issuance, $2.5 billion for refinancing. This is not re-borrowing, it is for the Nigerian government treasury bills that will mature and we will then refinance into dollars,” the Finance Minister explained.

She said the Eurobond which started last year has had a significant impact on the country’s cost of borrowing and the market itself.

“The immediate impact was a significant drop in the Bid Rates at the Auctions of both Nigeria Treasury Bills NTBs and the Federal Government bonds. In December 2017 and January 2018. The treasury bills rate dropped at that time form 16 to 13%. The proceeds about N162.50 billion were used to redeem Nigerian Treasury Bills (NTBs) which matured in December 2017. This translates to savings for Government on new borrowing while also making the cost of borrowing for the real sector cheaper since the sovereign rate serves as a benchmark for other borrowers. The estimated proceeds of the N762.5 billion will be used to redeem NTBs,” she said.

Aviation

Aviation Minister, Hadi Sirika, who also briefed Journalists at the end of the meeting, said a member of the consortium of transaction advisory services for the establishment of a national carrier.

“Today Council considered a memo from transportation regarding aviation. It was a memo that was brought to substitute a member of the consortium that will provide transaction advisory services for the establishment of National carrier. And that member of the consortium is Messer Lufthansa Consulting. Council considered and approved that substitution with another company called Airline Management Group AMG with Avia Solutions GE to join the other members of the consortium to continue providing that at the same cost of N341, 200 million,” he said.

Giving reasons for the substitution, the Aviation Minister said: “On why we substituted Lufthansa Consulting, fundamentally there are two reasons. One, that particular member of consortium, Lufthansa Consulting, in the wisdom of the Council, we felt that consulting is an appendage of the airline group and that might bring conflict of interests. Because Lufthansa themselves may want to join, partner or help in the process during the procurement phase of this transaction. And of course they are members of Star Alliance, members of One World and members of Sky team, others may feel short-changed the person advising us set up this airline  which is going to be private sector driven, is a member of an alliance which they are not part of. 

“Secondly, since we appointed the transactions advisers in various aviation projects in May 2017, about six of them, five of them have gone ahead, the one for construction of airport, the one for acropolises and the one for MRO and so on and so forth. Most of them have produced the outline business cases and we are on our way to doing the full business case. However, Lufthansa Consulting, did not accept the offer neither have they signed any contract. They countered the offer instead. One of the conditions the out is that we should pay them 75 percent of the total cost, which is against our procurement law, they also wanted us to change the contract from Naira to Euro, they also wanted us to open an Escrow account in an internationally recognized bank outside the country where the money will be domiciled etc. So we found that that was against our procurement law and we have been going back and forth for seven months to see whether they can accept the terms of conditions and even if they had done at a time and they didn’t up till today, we couldn’t continue with them because it will compromise the system which we thought should be transparent, so that is why we sought the approval of council to substitute them why a neutral person and someone who will accept the terms and conditions given, to accept payment in Naira, to accept 15 percent payment of the entire cost as against 75 per cent,” Sirika explained.

Nnenna.O