Nigeria plans to refinance high-cost debt and raise funds to help plug its budget deficit, leveraging strong investor confidence amid elevated oil prices fueled by the US-Iran conflict, Finance Minister Taiwo Oyedele told Bloomberg TV in an interview on Wednesday.
Financing opportunity
“We think that this timing is good for us to be able to maybe even refinance some of our expensive past debts, but also to raise more funding for our development at this critical time,” Oyedele said. “You don’t know what happens tomorrow. But as of today, market conditions are actually very good.”
The US-Israeli war on Iran has pushed Brent crude up as much as 63% this year, creating an opportunity for producers outside the Middle East like Nigeria. Increased oil revenue has bolstered the country’s terms of trade and creditworthiness, with the premium investors demand to hold Nigerian dollar bonds rather than US Treasuries falling 80 basis points since the start of the war to 262—the lowest in more than a decade.
Budget deficit
Africa’s most-populous nation is seeking to plug a budget deficit of 30 trillion naira ($22 billion) this year, said Oyedele. The funding gap remains despite increased revenue from taxes after an overhaul of laws that he spearheaded early on in the current administration, which came to power in May 2023.
“We’re keeping our options open, we know the size of the deficit,” Oyedele said, including less-costly concessionary loans. Conversations are ongoing with the World Bank and other multilateral lenders, while the country is seeing lots of interest from investors encouraged by reforms undertaken by the government.
Inflation pressure
While the nation has benefited from elevated oil prices, the global energy shock has also fueled inflation, forcing the central bank to halt an interest-rate cutting cycle. That adds further pressure on President Bola Tinubu to deliver capital projects like schools and hospitals, as he seeks re-election for another four-year term in January.
Outlook
Nigeria’s ability to refinance expensive debt at lower spreads represents a rare window of opportunity created by geopolitical tensions lifting oil prices. The 80 basis point compression in the country’s credit spread to 262—lowest in over a decade—signals restored investor confidence in Nigeria’s debt profile following market liberalization reforms and improved oil revenue.
The $22 billion funding gap remains substantial, but the combination of elevated oil prices, tax reform progress and multilateral lender interest gives the government multiple financing options. However, the central bank’s pause on rate cuts amid inflation pressures complicates the domestic funding environment, potentially increasing the cost of naira-denominated borrowing.
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