High cost of issuing long-term domestic debt source of worry to stakeholders.

Written by on May 2, 2022

The high cost of issuing long-term domestic debt, which has made banks’ increased appetite for external borrowings through Eurobonds, has become a source of worry to stakeholders.

This is because the factors that will prevent default, neutralise the negative impact of the devaluation of domestic currency on repayment as well as mitigate currency risk like foreign exchange earning assurance and derivatives contracts are not fully operational.

Investors called for a downward review of interest rates to boost investment in the nation’s capital market to enable the banks to service their obligations from local sources and make the market more attractive for issuers to raise funds.

With virtually all the deposit money banks (DMBs) approaching the international capital market to access cheaper long-term funds to the tune of 1.6 million dollars.

Stakeholders have warned that this could lead to severe exchange rate risks with affected companies having their profits eroded due to devaluation of the naira.

Kevin Madu

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