Final Update:
- The deal is now closed
- Subscriptions was about $7.9 billion (about 8 times what was on offer)
- Nigeria only got approval from the National Assembly to take $1 billion
- Rates closed 7.875%
- There will be bullet repayment of principal on the 16th of February 2032.
Nairametrics| Nigerian government officials have successfully wrapped up sales of the country’s Eurobond, after a 4-city roadshow in the US and UK. Reports reaching Nairametrics suggest the $1 billion 15 year tenor Eurobond was oversubscribed by as much as 8 folds.
This is fantastic news for Finance Minister Kemi Adeosun who has had to deal with issues surrounding her competency having been compared with her predecessor Okonjo Iweala. It is also good news for the embattled CBN Governor, Godwin Emefiele who has had to fight off criticisms of his exchange rate policy, a potential headwind in the success of the road show. It was alleged that his absence in the road show was deliberate.
Although there was initial skepticism around the potential uses of the bond proceed, given the fact that the public haven’t yet seen a comprehensive Economic recovery plan and precise uses of the proceed, Investors however, piled up to have a slice of Nigeria’s debt.
The Notes represent the Republic’s third Eurobond issuance, following issuances in 2011 and 2013. READ MORE- https://t.co/TEbpq2v9NO https://t.co/Lc9n1fEyhK
— Nigeria Insights (@InfoInsightsNG) February 9, 2017
This can be attributed to the fact that yields are very low globally, given the muted growth being experienced all over the world. Nigeria’s Eurobond is attractive given the fact that it attracted a yield of about 7.875% in an environment than even offers negative rates.
Following the interest rate environment, Emerging market bonds have held their attractiveness for investors who are always on the look out for yields.
Demand for Nigeria’s Eurobond was as high as $7.9 billion of orders for a $1bn 15 year issue; showing that it was oversubscribed by at least $6.9 billion.
Given this high level of demand displayed by international investors, analysts are of the opinion that Nigeria should have taken the opportunity to tap more funds from the global markets, stating that raising only $1 billion is inefficient.
However, the National Assembly only approved $1 billion and given the riskiness of Nigerian debt in the light of adverse macro indices and uncertainty around the currency, the Eurobond was priced relatively higher at 7.875%.
Concerns still remain over the potential use of the proceeds, as it may be spent supporting recurrent expenditure, or supporting the Naira. The government claims the funds will be used to fund capital expenditure earmarked in the proposed 2017 budget. More specifically, the funds will be channeled towards road construction, bridges, rails etc.
The Eurobonds are also expected to be listed on the FMDQOTC and the Nigerian Stock Exchange.