7 Reasons why this loan should give you some hope

What does this mean in very simple language?

Well, it just means that the federal government of Nigeria has just borrowed $1B from the international market to prop a faltering economy.

Here are seven things you should know about what the lawmakers and the executive just did:

1. The 'Euro' in 'bond' doesn't mean a thing

The fact that it is called 'Eurobond' doesn't mean that Nigeria would have to pay back this debt in Euros--the official currency of the European Union (EU).

Basically, bonds can be denominated in any currency, meaning Nigeria can pay back in dollars.

A Eurobond is issued by an entity in a different country.

However, it is denominated in a currency that is different from that of the country that is doing the borrowing.

2. Nigeria has 15 years to pay off this debt

The bond (you can actually begin to call it 'loan' from this point), will mature on February 16, 2032, meaning that we have 15 years to pay off this debt.

We can be servicing this debt in piecemeal until it matures, if we know a thing or two about financial discipline and prudence.

3. Who made this whole bond thing happen?

Credit has to go to finance minister Kemi Adeosun, Central Bank Governor, Godwin Emefiele and Budget Minister, Senator Udoma Udo Udoma.

Recently, the trio took a handful of other government officials to financial institutions in the United States, Southern Africa and Europe to make a case for why Nigeria needs this bond.

It was called a road show.

It paid off nicely.

Adeosun had the following words on her lips everywhere the team turned up: “Nigeria is implementing an ambitious economic reform agenda designed to deliver long-term sustainable growth and reduce reliance on oil and gas revenues while reducing waste and improving government expenditure."

And guess what?

The international community bought this gospel.

4. Investors still consider Nigeria a good place to do business

What this has shown is that in spite of all the doom and gloom you hear out there, the world still believes that Nigeria is one nation worth investing in.

And this Eurobond thing has shown that investors are still ready to hedge their bets on Nigeria.

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The bond was even over-subscribed. Nigeria had a pre-issuance target of $1.0, but ended up with orders in excess of $7.8B, suggesting that there's still a huge appetite out there for Nigeria's market.

Hello!!

If there's one market you should invest in, it's one that is 180 million strong and still growing, right?

Never mind that Africa's biggest market is currently grappling with a slump in the global price of crude oil and poor leadership.

5. This money won't solve all of Nigeria's problems

According to financial analyst, Tunji Andrews, the $1B Eurobond is like a drop in the ocean, but like they say around here, at all ,at all, na im bad pass.

We need more than this money to get this nation off the ground.

But it's still better than nothing.

The money can help Nigeria build critical infrastructure in the medium to long term.

Spending this money the right way is key, actually.

If the money isn't stolen in the end, it could go a long way, because if you rebuild crumbling infrastructure, you are jump-starting the economy.

In the 2015 budget, only about 10 percent was allocated for infrastructure projects.

You certainly don't grow an economy by spending that little on infrastructure.

The 2016 and 2017 budgets allocated about 30 percent to capital projects.

But, we don't have the money. We are so broke right now

The Eurobond will help Nigeria bridge that deficit, hopefully.

If this money helps toward funding the Lagos-Kano-Calabar rail line and other critical infrastructure, we may well be on our way out of economic stagnation.

6. It's not Nigeria's first Eurobond adventure

Nigeria first issued a $500M Eurobond in 2011.

In 2013, Nigeria issued another $1B Eurobond.

The question is, what did we do with previous bonds?

Your guess is just as good as mine.

If the past is any guide, we need to monitor this 2017 bond carefully.

Do you copy?

Take away corruption and it's not such a bad deal on paper.

The money just needs to be judiciously used.

And if we show the world that we have gotten our acts together, more runaway investors will beat the bush path toward a return.

7. Eurobond can drive down inflation

The last time we checked, Nigeria's inflation stood at double digits--18 percent to be precise.

The reason we are in a recession is that there is not enough money in circulation.

Our currency is benchmarked against the dollar and if undefinedis it any wonder that even the dollar is scarce?

Here's the thing: money needs to be pumped into the economy and the Eurobond money is part of what the doctor ordered.

The interest rate of this Eurobond is 7.875 percent per annum, meaning that Nigeria borrowed $1B to be repaid in 15 years at an interest rate of 7.875 percent.

Domestic borrowing rates average about 15 percent. That means the Eurobond loan is a cheaper alternative.

The Eurobond can significantly reduce pressure on the domestic borrowing market which could have the domino effect of driving down local interest rates and reduce inflation rate.

In the words of a former Vice President of the World Bank for Africa, Obiageli Ezekwesili, "kudos to the federal government for success recorded at the launch of the $1B Eurobond. The strong appetite of investors in the Dollar-Bond issued is good news.

"Now the federal government must work harder to persuade other sources of external financing--the multilaterals and bilaterals who are more hard nosed for its reforms.

"The more foreign currency risk we are exposed to through external borrowings like Eurobond, the more compelling for FG to restructure economy".

We totally agree, Madam.