Nigeria’s $1bn Eurobond Records Eight Times Oversubscription, Signposting Investor Confidence

• Shames analysts talking down the economy

Obinna Chima

The federal government yesterday announced that its US$1 billion Eurobond was 780 per cent oversubscribed, demonstrating a strong market appetite for Nigeria.

The government also revealed that the newly established US$1 billion Global Medium Term Note programme will bear interest at a rate of 7.875 per cent and will mature on 16th February 2032, with a bullet repayment of the principal.

The success of the Eurobond is bound to put a lot of analysts, who had expressed concerns that Nigeria’s recent downgrade by ratings agencies and uncertainty over oil output and currency controls might dampen investor appetite, to shame.

Nonetheless, the yield of 7.875 per cent on the $1 billion Eurobond showed that investors priced in the risk of the credit downgrade by Fitch recently.
Nigeria intends to use the proceeds of the notes to fund capital expenditure in the 2016 budget.

A statement signed by the Director Information in the Ministry of Finance, Mr. Salisu Na’inna Dambatta said: “The development was clearly a sign of renewed confidence in the economy which has been hurt by the slump in crude oil prices.”

The notes, according to a statement last night, represented the country’s third Eurobond issuance, following issuances in 2011 and 2013.

“The notes were approximately eight times oversubscribed with orders in excess of US$7.8 billion compared to a pre-issuance target of US$1 billion, demonstrating strong market appetite for Nigeria.

“This is despite continued volatility in emerging and frontier markets and it shows confidence by the international investment community in Nigeria’s economic reform agenda.
“The offering attracted significant interest from leading global institutional investors.

“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 statement said.
In addition, the federal government will apply for the notes to be eligible for trading and listed on the FMDQ OTC Securities Exchange and the Nigerian Stock Exchange.

The pricing was determined following a roadshow led by the Minister of Finance, Mrs. Kemi Adeosun; Minister of Budget and National Planning, Senator Udoma Udo Udoma; Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele; Director General of the Debt Management Office (DMO), Dr. Abraham Nwankwo; and Director General of the Budget Office, Mr. Ben Akabueze.

Commenting on the successful pricing, Adeosun said: “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.

“At the heart of the agenda is a commitment to invest in developing Nigeria’s infrastructure through a target 30 per cent annual budget commitment to capital expenditure.
“We are establishing the building blocks for long-term growth and making the hard decisions that must be made to reset our economy appropriately.”

Nwankwo said: “Nigeria is delighted to have successfully priced its third Eurobond issue. We have successfully extended the tenor of our borrowing programme in the international capital markets to 15 years, at a price that reflects belief in the quality of Nigeria’s cash flows and government.

“The Eurobond is the latest step in a broader debt strategy designed to significantly re-balance our debt profile towards longer term financing and reduce the burden of interest on our annual budgets,” he stated.