Nigeria Sells Another $500M Eurobond Priced At A Yield of 7.5%. Nigeria has again tapped the bond market selling a $500m eurobond aggregate principal amount of notes at a yield of 7.5% under its US$1.5 billion (increased from US$1 billion) as it seeks to turnround its recession-hit economy with big increases in public spending on infrastructure. The Global Medium Term Note Programme, will be consolidated and form a single series with the Republic’s existing US$1,000,000,000 7.875 per cent. The notes are due 2032.
In February it issued a $1bn bond with a coupon of 7.875 per cent that was almost eight times over-subscribed. Like last month’s issuance, this paper has a 15-year tenure. Nigeria’s national assembly had approved the eurobond sale after the government raised the oversubscribed bond.
“The successful pricing…demonstrates continued strong market appetite for Nigerian securities,” the finance ministry said in a statement.
The $500 million Eurobond was oversubscribed to the tune of $3 billion, a positive for Nigeria. However, foreign investors are avoiding Nigeria’s Naira denominated fixed income investment instrument, and opting for the Dollar denominated Eurobond instead, the net effect of which is a zero-sum situation.
The country’s economy contracted in 2016 for the first time in 25 years, a reflection of the impact of the sharp fall in global oil prices on the crude exports-dependent nation of 180m people. Shortage of foreign currency, among others, caused the economy to shrink last year for the first time since 1991. The central bank has also blocked importers of 41 selected goods including textiles from the interbank foreign-currency market. The lack of dollars has forced businesses to buy foreign currency on the black market at about 25 percent more than the official rate. The lack of implementation of a market-determined exchange rate – promised by the central bank last June – has apparently not cut off investor interest entirely in the country’s debt.
Nigeria is also seeking funding to plug a deficit in its proposed 2017 budget of around $7.7bn from China and the World Bank. The International Monetary Fund is to issue a report later on Wednesday detailing its view on the government’s management of the country’s economy that will inform the view of lenders such as the World Bank about whether it will disburse a $1bn loan.
Commenting following the successful pricing, the Honorable Minister of Finance Mrs Kemi Adeosun said:
“The proceeds from this additional note issuance will go towards funding capital projects in the 2016 budget. Infrastructure spending is at the heart of our National Economic Recovery and Growth Plan, which was released earlier this month and guides how we will deliver the urgent reform our economy needs between now and 2020. Resetting the Nigerian economy is essential in order for us to deliver sustainable long term growth.”
Also commenting on the Notes’ pricing, the DMO Director General, Dr Abraham Nwankwo said:
”Following the success of our US$1 billion note issuance in February, Nigeria is delighted to have increased our 2017 Eurobond programme to US$1.5 billion and to have secured the additional US$500 million. Nigeria was keen to take advantage of favorable market conditions and investor appetite for Nigerian debt to complete our foreign borrowing programme for the 2016 budget and deliver further funds for vital capital projects.”
Citi, and Standard Chartered acted as Joint Lead Managers and Stanbic IBTC, as Financial Advisers on this Issue.
IN A RELATED DEVELOPMENT NIGERIA ANNOUNCES $6.1B LOAN FROM CHINA’S EXIM BANK. NIGERIA’S MINISTER OF TRANSPORTATION ROTIMI AMAECHI MADE THE REMARKS DURING THE MINISTRY’S 2017 BUDGET PROPOSAL DEFENSE AT THE NATIONAL ASSEMBLY IN ABUJA, THE NATION’S CAPITAL CITY ON MONDAY. HE SAID THE NIGERIAN GOVERNMENT HAS CONCLUDED PLANS TO BORROW 6.1 BILLION U.S. DOLLARS FROM CHINESE EXIM BANK TO COMPLETE ALL RAIL PROJECTS IN THE COUNTRY BY 2019.
Amaechi said the government had targeted the construction of Lagos – Ibadan, Kano – Kaduna rail projects and the first phase of the Coastal Rail (Lagos-Calabar) in the 2017 budget.
THE MINISTER TOLD LAWMAKERS THAT PRESIDENT MUHAMMADU BUHARI INSISTED THAT ALL RAIL PROJECTS IN THE COUNTRY THAT HAD BEEN AWARDED BY PREVIOUS ADMINISTRATIONS MUST BE RESUSCITATED AND COMPLETED ON OR BEFORE DECEMBER 2019.
Amaechi said rail projects needed to be completed due to the economic importance of these projects and the benefits to be derived by the generality of Nigerians.