UPDATED: Nigeria raises $2.86bn bonds to fund budget, other projects

Nigeria's ministry of finance building
Nigeria's ministry of finance building

The Nigerian government on Wednesday announced the issuance of $2.86 billion aggregate triple bond series under its Global Medium Term Note Programme.

A finance ministry statement on Wednesday night said the Notes comprise a $1.18 billion seven-year series, $1billion 12-year series and $750 million 30-year series.

Details of the issue show the seven-year series would bear interest at a rate of 7.625 per cent, while the 12-year series would bear interest at a rate of 8.75 per cent, and the 30-year series would bear interest at a rate of 9.25 per cent.

The offering attracted significant interest from leading global institutional investors with a peak combined order book of over $9.5 billion.

The Minister of Finance, Zainab Ahmed, said the successful transaction follows closely behind Nigeria’s successful engagement with the Fitch rating agency, and their subsequent decision to change the outlook on Nigeria’s sovereign rating from B+ (negative) to B+ (stable), based on improving macro-economic fundamentals.

She said despite significant oil and wider macro market volatility, Nigeria has successfully raised its external debt requirements for the 2018 budget at a cost considerably lower than many of its peers across Sub-Saharan Africa.

The statement said the offer, which was more than three times over-subscribed, demonstrates the ongoing confidence of international capital market investors in Nigeria’s investment story.

The minister said each of the issues would be repayable with a bullet repayment of the principal on maturity.

The offering is expected to close on or about November 21, 2018, subject to the satisfaction of various customary closing conditions.

The proceeds of the Notes would be used to fund the fiscal deficit in the 2018 budget as well as other government projects.

President Muhammadu Buhari had signed N9.1 trillion 2018 budget, consisting N2.87 trillion for capital expenditure; N3.51 trillion for recurrent (non-debt) expenditure; and N2.01 trillion to be spent on debt servicing.

The budget was to be financed from N2.99 trillion to be generated from oil revenue; N31.25 billion from Nigeria Liquefied Natural Gas dividend; while N1.17 billion was to come from minerals and mining revenue.

About N658.55 billion was to come from Companies Income Tax; N207.51 billion from Value Added Tax; N324.86 billion from the Nigeria Customs Service; while N57.87 billion was to come from Federation Account levies.

In the same vein, the government expected N847.95 billion as independent revenue from its agencies, while tax amnesty income, signature bonus and unspent balance from previous years were to provide N87.84 billion, N114.3 billion and N250 billion, respectively.

The Notes, representing the sixth Eurobond issuance of the Buhari administration since 2016, followed the issues in 2011, 2013, two in 2017 and one in early 2018 and its first triple-tranche offering.

When issued, the Notes would be admitted to the official list of the UK Listing Authority and available to trade on the London Stock Exchange’s regulated market.

The government 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 finance minister said the pricing for the bonds was determined following a series of meetings with investors.

Other government officials on the delegation included Minister of Budget and National Planning, Udo Udoma; Central Bank Governor, Godwin Emefiele; Director General of the Debt Management Office (DMO), Patience Oniha; and Director General of the Budget Office of the Federation, Ben Akabueze.

The Joint Lead Managers for the issuance were Citibank Global Markets Limited and Standard Chartered Bank; and the financial advisors were FSDH Merchant Bank Limited.

“Nigeria is investing strategically in critical capital projects to bridge our infrastructure deficit, provide a better operating environment for the private sector, and improve the standard of living of our citizens,” Mrs Ahmed said.

“The proceeds of this issuance will provide critical financing for projects in transportation, power, agriculture, housing, healthcare and education as well as the capital elements of our social investment programmes. Nigeria’s Economic Recovery and Growth plan is delivering results.”

For Ms Oniha: “Nigeria’s continued ability to access the international markets to raise capital is a testament to investor’s confidence which has been supported by continuous engagement with them on various reform initiatives and outcomes.”

The DMO boss said the issuance of the Eurobonds, which received the prior approval of the executive and legislative arms of government, would not only provide capital to finance various projects, but also contribute towards the achievement of the Debt Management Strategy.

The ability to raise $2.86 billion, which is the exact amount government needed in volatile and challenging market conditions, she noted, has been described as a “stellar outcome.”

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