Nigeria sells $2.5bn euro bonds to replace debt

By Remilekun Davies… 

Nigeria sold a record $4.8 billion of Eurobonds last year, most recently in November, when it issued $3 billion of 10- and 30-year debt. Yields on the latter rose six basis points to 7.7 percent by close Thursday, the highest since they were issued. Nigeria’s local bonds have an average yield of 13.7 per cent, according to Bloomberg data.

Africa’s biggest economy on Thursday sold $1.25 billion of 12-year securities with a yield of 7.14 percent and a separate 20-year tranche, also $1.25 billion, at 7.7 percent, the finance ministry said on Twitter. Investors placed more than $11.5 billion of orders, according to the ministry. The country sold $2.5 billion of Eurobonds as it sought to lower funding costs by using the notes to refinance higher-yielding naira debt.

Neville Mandimika, an analyst at Rand Merchant Bank in Johannesburg, South Africa, said: “The level of demand for Nigeria’s bonds was “impressive,” especially given that global risk appetite is “significantly higher” today than when it last issued,’’ in a note to clients on Friday.

It should be recalled that Patience Oniha, the debt management director, at the 2017 Nigerian Debt Capital Markets Conference and Awards, organized by the FMDQ OTC Securities Exchange in Lagos made it known that borrowing would enable the country to bridge the gap in the 2017 budget currently facing liquidity problem to finance some capital projects. She also said the proposed Eurobond issuance would complement the 1.5 billion dollars raised from the international market in March 2017.

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Citigroup Inc. and Standard Chartered Plc. managed the latest deal, while Standard Bank Group Ltd.’s Nigerian unit was a financial adviser.

Nigeria ranks behind Egypt, which became the first African sovereign to tap the market this year when it sold $4 billion of debt on Feb. 13. Egypt, which Moody’s Investors Service rated B-, one level below Nigeria, paid 6.59 percent for 10-year notes and 7.9 percent for 30-year bonds and attracted $12 billion of bids from investors.

The sale completes a program of selling more foreign debt to help reduce the burden of double-digit yields on local-currency bonds.

Nigeria says the extra funds will be used to improve infrastructure and help revive the economy after it contracted in 2016 for the first time in a quarter-century.

Angola, Ghana, Ivory Coast and Kenya have all said they are considering Eurobonds soon.