Osinbajo–Come off your high horse!

The bond market is where governments and other institutions raise money to finance projects. For example, a government that wants to build a hydroelectric power station could sell internal or external bonds to raise money to pay for the power station. The government, with an eye on the returns from the power generation, promises the investors a certain percentage on their investment. There’s hardly anything mystical about this process: a bank or banks sell the bonds; Oga Sule, with some financial reserves, goes into the bank, and rather than a straight deposit or savings, he decides to buy the government bond. He gets a bond certificate, which he keeps till he needs his money to bury his long dead grandmother, at which time, he presents the paper to the government for cash.

Long story, Nigeria government cites to the oversubscribed bond that it sold on the European markets. According to information, Eurobond, as it’s called, guarantees a minimum yield at issue of 5.375%. The yield increases to 7% if Oga Sule is prepared to cash out in 2021.

First and foremost, Buhari’s government has now taken a loan and committed Nigeria to debt. Not long ago, the news reported that the Nigerian Congress refused the Buhari’s administration power to borrow money. Either the news was incorrect or Buhari has defiled the Congress, which I doubt, the irrefutable fact for all to know is that Nigeria is now committed a debt that we have to pay at a later time.

Second, the rate of returns guaranteed by the newly issued bond will top any other rates in the debt market. IMF would have given us a loan at less than 3% point, but Buhari turned down all the much needed structural adjustments that the Fund suggested. The World Bank, China and others would have done the same, but Buhari could not muster the political and economic clouts necessary to satisfy these bodies. In short, we’re paying dearly for our failures to acknowledge the realities of our situation.

That Nigeria’s debt was oversubscribed is because investors could not get the same rate of returns from any other sovereign fund, period! It’s not a reflection of our economy. Yes, like any drug, the euphoria from the excess money in the hands of Buhari’s government could present the illusion of economic recovery; the real pain is when it has to be paid back.

Debt is good if it’s properly utilized for real capital projects, but unfortunately, Buhari’s government that failed both the political and economic muscle to push adjustments is not the right candidate to trust to utilize debts in a constructive manner.

Nigerians want to hear their government borrowed money to build a new road or bridge or power plant—not salaries.
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