Nigeria successfully raised US$1 billion from the international markets on 9 February despite initial fears that investors might have shunned the issue because of concerns over how the country is managing its exchange rate policy. Not only did Nigeria get the US$1 billion, but investors put US$7.8 billion on the table, which was nearly eight times more than what it sought to raise.

At a price of 7.875%, the issue was considered too attractive for investors to miss. The government is spinning the success of the offer as a sign of investors’ confidence in the Nigerian economy and an endorsement of the government’s current policy direction. But sources in the financial industry have told Nigeria Politics & Security that it is more a reflection of the strong demand for high yielding emerging market assets, rather than an endorsement of the government’s current economic management policy.

There is also some suspicion that the government may have offered some additional benefits in the deal that have not been disclosed to the public. The Eurobond has a 15-year tenure and is structured as a bullet repayment when it matures in 2032. In a statement issued after the success of the offer, Nigeria’s Finance Minister Kemi Adeosun said that the funds will go towards refinancing the N2.36 trillion (US$7.5 billion) deficit in the 2017 budget.

The government plans to borrow N1.0 trillion (US$3.2 billion) externally this year. The successful raising of the US$1 billion means it already has roughly 30% of its 2017 borrowing plan confirmed. There are plans to finalise the economic growth and recovery plan by the end of February 2017, and then present this to the World Bank for another US$1 billion loan. Another US$400 million is expected from the African Development Bank (AfDB).

With a significant drop in oil revenues and uncertainty over non-oil revenues, the government is hoping that the borrowing will help it sustain its capital expenditure plans for the year, which have always been poorly funded in the past. In the 2016 budget, only 50% of capital expenditure received funding. But there are also fears that the borrowed money will not be used appropriately and will spring Nigeria into another debt trap.