Nigeria recently concluded a road-show in Europe.
The Minister of Finance, Ngozi Okonjo-Iweala, said on Wednesday that Nigeria returned to the capital market after two years of absence and sold $1 billion bond with ease.
Ms. Okonjo-Iweala said this in Abuja while briefing newsmen on the recently concluded road show in Europe and U.S. to float the billion dollar bond to international investors.
She said the bonds, which were four times oversubscribed, were improvements on investors’ response to the $500 million bonds floated in 2011.
“The reason we are excited is because as you know, these are turbulent times, especially following expectations of tapering of Qualitative Easing by the U.S. Federal Reserve Bank.
“So, the fact that Nigeria could go to the bond market, after waiting a while and we got four times our subscription, shows confidence in the strength of the Nigerian economy,’’ she said.
Ms. Okonjo-Iweala said that the transaction attracted top investors primarily from US, Europe and Asia.
“The demand was such that we couldn’t meet all of them. Over 200 investors could not get any share of the bonds because we were oversubscribed,’’ she added.
The minister said the $1 billion bond was offered in two categories at the international capital market.
She said that $500 million was offered as a five-year bond at 5.125 per cent interest rate, while the other $500 million was offered as a 10-year bond at 6.375 per cent interest rate.
She added that the two-category offer gave Nigeria the opportunity to achieve an overall cheaper cost of borrowing.
“This rate is much better than what we got when we did $500 million in 2011.This means that people have more confidence in our economy which is very significant for us,’’ she said.
Ms. Okonjo-Iweala said that the money was designed to support infrastructural projects within the country and not for budget support.
“What we have in mind is investment in the power sector. We are looking at funding the transmission grid. As you know, we have privatised both the generation and distribution power plants.
“But the transmission and grid remain in government hands and we must keep up with transmission in order to make the entire power sector work.
“We are also investing in building a gas pipeline from the east of the country to the west where we have all these power stations with no access to gas.
“We have already spent about $400 million on it, so we want to complete it with some of the money we are raising now,’’ she said.
She also said the Federal Government may invest in the second Niger Bridge and also support the bulk trader.
“The bulk trader is created to support the power market within the country. The bulk trader will come in to help when the distribution company is unable to purchase the power generated. When power is generated and there is to be any lapse, the bulk purchaser comes in. That makes the market to work,’’ she said.
The Director-General, Debt Management Office (DMO), Abraham Nwankwo said the success of the bond sales was a testament of sound economic management and hard work by the federal government.
“They acknowledge that Nigeria had been consistent in implementing macro-economic and structural reforms over the past ten years.
“This has led to landmark achievement in the banking sector and great strides in the agricultural sector,’’ he said.
Mr. Nwankwo said Nigeria’s decision to transfer from using Excess Crude Account (ECA) to Sovereign Wealth Fund helped to portray the country in good light.
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