Market News

by Joseph Inokotong

The Federal Government’s successful issuance of US$2.2 billion Eurobonds in the international capital markets will boost foreign exchange (FX) inflows into the economy.

The debt instrument, which was over-subscribed will in addition, enhance the value of the Naira against other foreign currencies, albeit temporarily.

An economic expert, Dr. Chijioke Ekechukwu, Managing Director at Dignity Finance and Investment Limited told Tribune Online that when the expectations materialised, there should be no need for celebration because it would be short-lived.

“From hindsight, anytime the Federal Government raises Euro bond or any other foreign currency denominated bond, there would be a temporary increase in the supply of foreign currencies. This increase in supply will, in the very short run, affect the rate. The exchange rate will start easing off and going down. When it does happen, there wouldn’t be a need to celebrate because it would only be short-lived,” Ekechukwu stated.

The Debt Management Office (DMO) announced in a statement on Monday that the Federal Government raised US$2.2 billion in Eurobonds maturing in the international capital markets in 2031 (6.5-year) and 2034 (10-year) to finance the 2024 fiscal deficit and support the government’s budgetary needs.

The DMO said, “The Federal Government has successfully priced US$2.2 billion in Eurobonds maturing in 2031 (6.5-year) and 2034 (10-year) in the international capital markets.”

The funds have USS700 million and USS$1.5 billion placed in the 2031 and 2034 maturities, respectively.

The 6.5-year and 10-year Notes were priced at Coupon and Re-offer Yields of 9.625 percent and 10.375 percent, respectively.

Nigeria’s offerings attracted a wide range of investors from multiple jurisdictions including the United Kingdom, North America, Europe, Asia, Middle East and participation from Nigerian investors, which it views as an expression of continued investor confidence in the country’s sound macro-economic policy framework and prudent fiscal and monetary management.

The transaction attracted a peak order book of more than US$9 0 billion. This underscores the strong support for the transaction across geography and investor class.

Concerning the investor class, demand came from a combination of Fund Managers, Insurance and Pension Funds, Hedge Funds, Banks, and other Financial Institutions.

Commenting, following the successful pricing, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, said:

“Today’s successful issuance signposts increasing confidence in ongoing efforts of the President Bola Ahmed Tinubu, administration to stabilize the Nigerian economy and position it on the path of sustainable and inclusive growth for the benefit of all Nigerians. The broad range of investor appetite to invest in our Eurobonds ts encouraging as we continue to diversify our funding sources and deepen our engagement with the international capital markets.”

The Governor of the Central Bank of Nigeria, Olayemi Cardoso said, “This outcome underscores the growing confidence of investors and the resilience of the Nigeria credit, and evidence of our improved liquidity position and continued access to international markets to support the financing needs of the government”.

Commenting on the Notes’ pricing, the Director-General of the Debt Management Office (DMO), Patience Ontha said, “With the successful pricing of the Notes on an intra-day basis, Nigeria has registered a landmark achievement in the international capital market. The size of the Order book at approximately 4.18x of the offer amount, and the strong and diverse investor base helped to price the new 6 5-yr at 9.625%, while the new 10-vear Notes were priced at 10.375%. The DMO remains committed to maintaining transparency and open communication with investors and stakeholders and appreciates the continued confidence and support of the international and Nigerian investors who participated in the pricing.”

The Notes will be admitted to the official list of the UK Listing Authority and available to trade on the London Stock Exchange’s regulated market, the FMDQ Securities Exchange Limited, and the Nigerian Exchange Limited.

According to the DMO, “The proceeds from this Euro Bond issuance will be used to finance the 2024 fiscal deficit and support the government’s budgetary needs.”

Nigeria mandated Chapel Hill Denham, Citigroup, Goldman Sachs, J.P. Morgan, and Standard Chartered Bank as Joint Bookruuners. FSDH Merchant Bank Limited acted as Financial Adviser on the issuance.