Fidelity Bank looks to refinance existing bonds with N50bn fresh debt

Fidelity Bank is looking to refinance its existing bonds by selling up to N50 billion ($163.2 m) in Tier II debt before the second quarter of next year.

Samuel Obioha, the bank’s head of investor relations was quoted by Reuters as saying “we might issue naira bonds before Q2 2020, between N30 billion and N50 billion.”

“Currently, we have a seven-year local bond issued in 2015, callable after five years. We might issue a new Tier II bond before May 2020 to replace the existing bond and take advantage of its capital impact.”

According to Reuters, bond yields have been declining on the Nigerian debt market in the face of recent Central Bank of Nigeria’s (CBN) policies aimed at forcing lenders to boost credit to businesses and consumers, which could swell naira liquidity on the money market.

Debt market yields have dropped from a high of 18 percent since the government redeemed some of its treasury bills in 2017, rather than rolling them over as before to lower borrowing cost. Yields on the one-year treasury bill were quoted around 11 percent on Friday.

The CBN has been tightening liquidity to curb inflation and attract foreign investors into the bond market to support the naira. But in a surprise change of stance, the bank in March cut interest rates by 50 basis points for the first time since November 2015.

Analysts forecast another 50 basis point rate cut at the Monetary Policy Committee’s next rate meeting on Tuesday.

The CBN had earlier announced policies aimed at boosting credit growth in the country following a recession. The apex bank hopes it can help revive Nigeria’s economy stuck with low growth. Traders, however, said pressure had started to build on the currency.

Fidelity Bank said it had met central bank’s new lending requirements and that it expected yields to moderate as competition for credit rose, a development that could hurt margins