130% Oversubscribed: These factors may have led to a successful initial Diaspora Bond sale
Nigeria was able to successfully raise $300 million in its first ever diaspora bond at at coupon rate of 5.625 per cent for a tenor of five years. The Director General of the Debt Management Office (DMO), Dr. Abraham Nwankwo, while announcing the success, stated that the bond was over-subscribed at 130%.
The success of the program, according to the DMO was hinged of some factors, such as;
- The way the bond was structured was in such a way that both institutional and retail investors.
- In fact, it is the first African country to issue a bond targeted at retail investors in the United States
- The bond was approved and partly regulated by United States Securities and Exchange Commission (U.S. SEC) which provides an opportunity to access a wide range of investors.
- Underpinning the importance of the approval, Minister of Finance, Kemi Adeosun, said “To have received the approval of the U.S. SEC was indicative that the highest level of transparency and accountability in the economic process has been attained.”
- Being a dollar denominated bond, investors outside Nigeria are insulated from any form of exchange rate loss as interest payments will be in US dollars and not in Naira
- It was also successful because some of the investors, who are mostly Nigerians, felt a sense of patriotism as it was also an opportunity to lend a helping hand to the resuscitation of the Nigerian economy, albeit with some returns.
- The coupon rate of over 5% per annum is also very competitive and higher than what is obtainable with other similar less risky investments overseas.
Following the subscription, the country through the bond, can now routinely access funds from private banks and wealth managers in the U.S. and European markets, a benefit not accessible through Eurobonds.
With these advantages, the diaspora bond, apart from serving as a means of bringing in the participation of Nigerians in diaspora in the economic rehabilitation, also serves as another means for the vast borrowing program of the Federal Government.