Across the broad spectrum of the nation, the moods have generally been upbeat in the wake of Tuesday’s announcement of the outcome of Nigeria’s first-ever domestic dollar bond issue, which grossed $900 million as against the initial target of $500 million.
Putting the development in context, Adetilewa Adebajo, an economist and chief executive officer of Lagos-based CFG Advisory was quoted by Bloomberg as saying: “…, there is investor confidence that the country is not in any risk of default.”
An elated Wale Edun, Minister of Finance and Coordinating Minister of the Economy highlighted that the oversubscription showed “continuing investor confidence in Nigeria’s stability and growth”.
‘’The huge success’’, he said “has strengthened the government’s efforts at deepening economic growth and advancing financial inclusion… underscoring government’s commitment to diversifying its sources of funding and bolstering economic growth despite current economic challenges”.
As chair of the African Caucus, it would also be for Edun, a moment to reflect on the place of the continent in the complex, intriguing but most certainly inequitable matrix of global finance politics.
“We have launched an initiative that not only strengthens Nigeria’s economic resilience but also expands the horizon for capital markets of African economies.
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“The overwhelming response from investors”, he said, “reflects the growing interest in Nigeria’s economic opportunities and the broader investment potential of Africa. With this bond issuance, Nigeria is positioning itself as a leader in financial innovation, driving both national and regional growth through strategic economic measures”.
The latter point, albeit subtle, could not have been better made. At a time the continent appears stuck with the Bretton Woods institutions –International Monetary Fund (IMF) and the World Bank, and their Euro-finance allies– and their never-ending bouts of ‘conditionalities’, Nigeria may have, without necessarily attempting to pull the roof down on anyone, taken advantage of local economy’s famed inner resilience on the one hand, and the muscle of its own Diaspora on the other, to channel a new path to finance its development aspirations.
The local foreign-currency denominated bond is after all cheaper, and allows the country a certain measure of flexibility not hamstrung by the politics of international lenders. This may be why the earlier plan to issue a Eurobond was jettisoned.
This takes us to the rationale given by the finance minister at the Lagos road show to kick off the bond issuance last month: “This historic issuance will provide essential foreign exchange liquidity and boost reserves, which will help stabilise the exchange rate, manage inflation, and eventually lower interest rates. It will also lay the foundation for increased investment by both domestic and foreign direct investors.”
The rationale apart, the minister, a top investment banker himself, was also, at the occasion demonstrably clear about the prospects in terms of the nation’s ability to repay the debt: “We already experience a significant influx of foreign portfolio investments, and this will further enhance it. On liquidity and risk management, the Nigerian economy currently generates about $55 billion in export revenue, which is expected to grow in both the oil and non-oil sectors. This growth will help manage liquidity and foreign exchange risks associated with raising and repaying these funds”.
As it is, the investors apparently believed him. It is, most certainly, a measure of the confidence reposed in President Bola Tinubu, particularly the rather bold reforms being undertaken under his leadership to steer the economy on the right course. Of course, the investors see in the president an individual, who as governor in Lagos had blazed a similar trail, using bonds to finance the development of critical infrastructure.
This may be why the signals from the financial markets have – not surprisingly – been generally positive. In fact, one of the early signs of the current mood is that the naira, which had weakened to N1,637 per dollar a day before, actually closed at N1,558 yesterday, 4.8 percent gain– the highest since July 22, according to Bloomberg.
Now that the funds from the maiden sovereign dollar bond are in, Nigerians cannot wait to see them translate to more investments in infrastructure to boost national productivity and to enhance economic stability.