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By Chinwendu Obienyi
Economic and investment analysts have urged the Federal Government to float a Diaspora bond as part of strategy to reduce Nigeria’s level of borrowing from foreign nations.
Worried about that the nation’s rising external debt burden could worsen with the government’s with increasing debt service or liquidating existing loans and new ones being processed.
They noted that right policies to float the Diaspora bonds which include; right rate of coupons, liberalisation of the market, and judicious use of the remittances would work positively as opposed to increasing the country’s debt burden.
This is coming after the Central Bank of Nigeria (CBN)’s Governor, Godwin Emefiele, early this week raised the alarm over the country’s burgeoning debt levels.
Speaking to newsmen shortly after the Monetary Rate Committee (MPC) meeting in Abuja, Emefiele advised the nation’s fiscal authority to float a Diaspora bond to pool remittances sent by Nigerians abroad for specific investments, rather than continuing with its offshore borrowing sprees.
According to him, Nigeria’s total public debt had grown from N12 trillion in 2015 to N32.9 trillion last December stressing that Diaspora bond option is cheaper and comes at a minimal cost compared to outright loans that are not suitable at a time of declining receipts from oil mineral resources.
Analysts who spoke to Daily Sun, noted for instance that the bonds will offer the Federal Government opportunity to borrow at a low cost backed by effective policies which would ensure it works.
“Diaspora bonds are government savings bonds designed with expatriates in mind. These bonds offer the opportunity for governments to borrow at a low cost and potentially improve their sovereign credit ratings. Emigrants meanwhile, have the chance to benefit both themselves and their homelands. Despite the sometimes unattractive terms of Diaspora bonds – for example, they can be long-term and low-yield – they tap into the emotional attachment people have for their mother land.
For instance, India used Diaspora bonds to raise financing to avert financial crises on several occasions, adding that the issuance of bonds in 1991 helped resolve balance-of-payment issues, while the same toll was used to offset international sanctions in 1998. Israel is another success story, but took a different approach to India such that instead of only issuing bonds when a financial disaster looms, Israel issues bonds every year and uses the capital predominantly for development purposes”, Analysts at MoneyCloud explained.
