Dear Subscriber,

The floods of July 2017, not only exposed the drainage problems of Greater Lagos, but also led to a spike in food inflation to 20.28% (July), the highest level in 8 years.

Meanwhile, the funding of the fiscal deficit for 2017 and investment in infrastructure has necessitated an urgent request from the President to the National Assembly for $5.5bn of Eurobond financing.

The proceeds of the external borrowing, at a rate of 7.75%pa, are to refinance domestic T/Bills with an excruciating debt service burden on the government (18.5%pa).

This external debt is designed to optimize the sources of borrowing. The only major risk is that of exchange rate exposure at the maturity of the Eurobonds. A sharp depreciation of the naira will mean a higher level of debt amortization (naira).

In the meantime, we expect to see a slow but general decline in domestic interest rates, which is good for local borrowers.

In this edition of the FDC Bi-monthly publication, the FDC Think-Tank analyzes these issues and their implications on your business and the economy at large.

Enjoy your read.