Nigeria floats $3 billion bond to fund budgetary expenditures
The Federal Government has floated the much awaited US$3 billion dual series bond to fund approved budgetary expenditures.
A statement from the Federal Ministry of Finance yesterday quoted Minister Kemi Adeosun as saying that “the government would utilise the proceeds of the Notes in funding the approved budgetary expenditures and for refinancing of domestic debt, as may be applicable.”
According to Mrs. Adeosun, the Notes represent Nigeria’s fourth Eurobond issuance, following issuances in 2011, 2013 (two series) and earlier in 2017.
She noted: “Nigeria is implementing an ambitious economic reform agenda designed to deliver long-term sustainable growth and reduce reliance on oil and gas revenues while reducing waste and improving the efficiency of government expenditure.
“Our economy is beginning to recover, Gross Domestic Product (GDP) having returned to growth in 2017, but we must maintain the momentum behind our investments in order to further drive growth. That is why we are, and will continue to focus investment on the enabling infrastructure we need to broaden economic productivity.
“Successfully extending out debt profile in the international market to 30 years is a key element of that strategy as it establishes a basis for the longer term financing required for transformational infrastructure investment.
“As we have always stated we are progressively replacing debt with revenue, which is reflected in the 2018 Budget proposal. We are establishing the building blocks for inclusive growth and beginning to see the results of the hard decisions that have been made to reset our economy appropriately.”
The aggregate principal amount of the dual series bond is being offered notes under the Federal Government’s US$4.5 billion Global Medium Term Note programme (increased from US$1.5 billion).
The Notes comprise a US$1.5 billion 10-year series and a US$1.5 billion 30-year series.
The Ministry of Finance said “the 10-year series will bear interest at a rate of 6.5%, while the 30-year series will bear interest at a rate of 7.625%, which will be repayable with a bullet repayment of the principal on maturity.
The statement said “the offering, which attracted significant interests from leading global institutional investors, is expected to be closed on or about 28 November, 2017, subject to the satisfaction of various customary closing conditions.”
When issued, 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.
Nigeria may apply for the Notes to be eligible for trading and listed on the Nigerian FMDQ OTC Securities Exchange and the Nigerian Stock Exchange.
The pricing was determined following a roadshow led by Mrs. Adeosun; the Minister of Budget and National Planning, Senator Udoma Udo Udoma; Central Bank of Nigeria (CBN) Governor Godwin Emefiele; Debt Management Office (DMO) Director-General Ms. Patience Oniha, and the Director-General of the Budget Office of the Federation, Mr. Ben Akabueze.
Commenting on the Notes’ pricing, the DMO Director-General Patience Oniha said: “With the successful pricing of our 4th Eurobond, Nigeria has become one of the few African issuers whose securities have attracted strong investor interest amongst institutional investors across the globe.
“This time, Nigeria issued a new 10-year bond at a yield of 6.500% and a 30-year benchmark, priced at a yield of 7.625%, which despite the longer tenure remains cheaper than our 15-year issuance earlier this year.
“The 30-year is a landmark as the tenor represents the first by a sub-Saharan country other than South Africa and importantly establishes the basis for long term infrastructure funding, which is a priority for this government.”
Oniha expressed satisfaction with international investors’ recognition of Nigeria’s huge potential.
“Perhaps even more important is that with this dual tranche issuance the objective of reducing the cost of government borrowing has been achieved,” she added.