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Tag: Eurobond

  • $2.5bn Eurobond to lower government cost – DMO

    $2.5bn Eurobond to lower government cost – DMO

    A proposed $2.5 billion Eurobond to refinance some of Nigeria’s treasury bill portfolio will not increase its overall debt stock but helps to lower cost, the Debt Management Office (DMO) said on Friday.

    The DMO said in a statement that proceeds from the bond sale would be converted to naira and used to redeem a more expensive local debt, thereby improving the government’s debt service ratio.

    The Minister of Finance, Kemi Adeosun, had said on Wednesday that the country plans to redeem N762.5 billion worth of treasury bills and that it would save government N64 billion each year after the refinancing is completed.

    In January, the Director- General of the DMO, Patience Oniha, told Reuters the government would consider raising $2.5 billion through Eurobonds in the first quarter to refinance a portion of its domestic treasury bill portfolio at lower cost.

    Nigeria wants to refinance $3 billion worth of a local treasury bill portfolio of N2.7 trillion.

    Eurobonds make up more than a fifth of Nigeria’s $15.35 billion foreign debt portfolio as of September 2017 and more than half of interest paid in the third quarter.

    Total domestic debt stood at N15.68 trillion by September.

  • What Nigeria stands to gain from $3b Eurobond, by DMO chief

    •DG says offer oversubscribed by 400 per cent

    The Federal Government plans to use the proceeds of the $3 billion Eurobond Offer it issued in two tranches of $1.5 billion for 15 years and $1.5 billion for 30 years to refinane domestic debts.  The offer, issued through the Debt Management Office (DMO), was oversubscribed by 400 per cent. In this report by COLLINS NWEZE, the DMO Director-General, Ms. Patience Oniha, explains the government’s debt management strategy and the envisaged impact of the offer on the economy. THERE were high expectations within the International Capital Market (ICM) when the Federal Government announced plans to raise $5.5 billion with the backing of the Debt Management Office (DMO).

    In line with the government’s debt management strategy, the $5.5 billion has two components. The first – $2.5 billion to part-finance the 2017 Appropriation Act deficit and $3 billion Eurobond to be borrowed from external sources and proceeds targeted at repaying maturing domestic debt obligations.

    So, when the $3 billion Eurobond offer eventually came and was oversubscribed by 400 per cent, the DMO Director-General, Ms. Patience Oniha attributed the success to foreign investors’ appetite for Federal Government’s instruments. The DMO chief, who oversaw the successful issuance of the country’s first Sovereign Sukuk of N100 billion, also gave further details.

    On plans to raise $5.5 billion from the international financial markets, Ms. Oniha explained the federal government’s strategy.

    She said: “The DMO had for several years raised funds for the government largely in the domestic market through FGN Bonds and Nigerian Treasury Bills, and to a limited extent, from external sources mainly the multilaterals.

    “While this had a beneficial effect of developing the domestic debt capital market, the government became the dominant issuer to the extent that it has been regularly accused of crowding out the private sector.

    “The outcome was obviously not intentional, but to remedy the situation. The DMO deemed it fit to shift some of the borrowing activities to the international financial markets. This is also in line with its debt management strategy of achieving a portfolio mix of 60 per cent domestic and 40 per cent external.

    “Through the strategy, the share of domestic debt has been brought down from over 85 per cent to 77 per cent as at September this year.”

    Giving insights into the components the DMO director0general said: “The $5.5 billion is made up of two components, the first of which is $2.5 billion to part-finance the deficit in the 2017 Appropriation Act. The 2017 Appropriation Act included new borrowings of N1.254 trillion from the domestic market and N1.068 trillion equivalent of about $3 billion from external sources.

    “As at October 2017, only $300 million in the form of a Diaspora Bond had been raised leaving an unfunded balance of $3.2 billion. The other component of the $5.5 billion external capital raising is the $3 billion whose proceeds are to be used to repay some maturing domestic debt obligations.”

    Speaking on the benefits expected from borrowings, she said: “The DMO’s role in financing budget deficits  as provided in Annual Appropriation Acts, are to support  budget implementation and the attainment of the government’s economic targets. The $2.5 billion is specifically targeted at fulfilling the DMO’s mandate in this regard.

    “On the $3 billion for refinancing domestic debt, there are several benefits for the action. Firstly, it will reduce the crowding out effect that I earlier referred to thereby creating more space for other borrowers in the domestic market.

    “It also has the potential to bring about a reduction in lending rates which would make the cost of production of goods and services by the private sector cheaper and more price-competitive.

    “Another major benefit of raising external capital is a lower cost of borrowing to government and a moderation in debt service costs. As you know, United States (U.S.) dollar interest rates are much lower than naira interest rates. The $1.5 billion 10-year and $1.5 billion 30-year Eurobonds were issued at coupons of 6.5 per cent and 7.625 per cent per annum respectively.

    “These coupons are certainly much lower than the 15 per cent to 17 per cent that the government borrows at in the domestic market for shorter tenured funds. There is also the fact that the $3 billion is a direct accretion to Nigeria’s external reserves which are extremely useful for managing the naira exchange rate.”

    Ms. Oniha explained what accounted for the over-subscription of the Eurobonds by over $11 billion (about 400 per cent of the $3 billion that the government took) and her agency accepted less than the $5.5 billion approved by the National Assembly.

    Her words: “The demand of over $11 billion from international investors is a demonstration of their confidence in the policies and reform initiatives of President Muhammadu Buhari as well as the economic outlook of Nigeria.

    “Like those investors, we ourselves can attest to the economic improvements in Nigeria as demonstrated by higher external reserves, stable exchange rate, Gross Domestic Product (GDP) growth of 1.44 per cent in the third quarter of 2017 and improvement in the Ease of Doing Business.

    “Our intention was not to raise the $5.5 billion at once. Our first priority was to raise the $2.5 billion required for the 2017 budget while the $3 billion required for refinancing domestic debt will be in a phased manner.

    “Also, from a technical perspective, we still wanted to moderate the cost even in the International Capital Market by managing the supply of Nigeria’s Eurobonds in the market.”

    On the significance of the 30-year Eurobond being issued for the first time in the country, she said: “It is remarkable that international investors were willing to take a long term risk on Nigeria by buying the 30-year Eurobond. This feat is even more remarkable when we consider that South Africa which has a superior sovereign rating of BB- compared to Nigeria’s B+/B rating is the only sub-Saharan country that has issued a 30-year bond in the International Capital Market.

    “The other outstanding aspect of the 30-year Eurobond is its Pricing at 7.625 per cent which is lower than the coupon of 7.875 per cent on the $1.5 billion 15-year Eurobond issued earlier in the year.

    “In terms of its specific benefits to Nigeria, it provides the appropriate funds for financing infrastructure which is typically long term while also reducing the refinancing risk of the debt stock.

    “It will also serve as a benchmark for local and foreign institutions which may need to raise long term dollar funds to invest in Nigeria under various Private Public Partnership (PPP) arrangements for infrastructure as well as privatisation.”

    She said the fresh borrowings from the International Capital Market will not anyway worsen the country’s debt burden.

    The DMO chief said: “I want to re-assure Nigerians that the government’s borrowings are pre-approved by the executive and legislative arms of government and are used to finance various activities of the government as appropriated.

    “These layers of approvals ensure that the borrowings are both necessary and scrutinised before the DMO embarks on actual borrowing.    The increasing focus by the current administration of using borrowed funds for infrastructural development is a step in the right direction.

    “As borrowing is deployed to infrastructure to promote economic growth, the benefits of job creation and increased production among benefits are good for all Nigerians.

    “Besides, the debate on debt burden should therefore shift to actively supporting the government to increase revenue to levels comparable to the sub-Saharan average of 17 per cent of GDP. The other part of the argument about debt becoming a burden is the issue of Nigeria’s revenue base which at six per cent of GDP is not only low but well below that of peer countries.

    “Interestingly, government’s revenue is now being given proper attention. The measures to increase revenues are already yielding some results, and as this trajectory continues, the need for borrowing is expected to reduce while debt service will become an increasingly smaller portion of revenue.”

     

  • What Nigeria stands to gain from $3b Eurobond, by DMO chief

    What Nigeria stands to gain from $3b Eurobond, by DMO chief

    •DG says offer oversubscribed by 400 per cent

    The Federal Government plans to use the proceeds of the $3 billion Eurobond Offer it issued in two tranches of $1.5 billion for 15 years and $1.5 billion for 30 years to refinane domestic debts.  The offer, issued through the Debt Management Office (DMO) was oversubscribed by 400 per cent. In this report by COLLINS NWEZE, the DMO Director-General, Ms. Patience Oniha, explains the government’s debt management strategy and the envisaged impact of the offer on the economy. THERE were high expectations within the International Capital Market (ICM) when the Federal Government announced plans to raise $5.5 billion with the backing of the Debt Management Office (DMO).

    In line with the government’s debt management strategy, the $5.5 billion has two components. The first – $2.5 billion to part-finance the 2017 Appropriation Act deficit and $3 billion Eurobond to be borrowed from external sources and proceeds targeted at repaying maturing domestic debt obligations.

    So, when the $3 billion Eurobond offer eventually came and was oversubscribed by 400 per cent, the DMO Director-General, Ms. Patience Oniha attributed the success to foreign investors’ appetite for Federal Government’s instruments. The DMO chief, who oversaw the successful issuance of the country’s first Sovereign Sukuk of N100 billion, also gave further details.

    On plans to raise $5.5 billion from the international financial markets, Ms. Oniha explained the federal government’s strategy.

    She said: “The DMO had for several years raised funds for the government largely in the domestic market through FGN Bonds and Nigerian Treasury Bills, and to a limited extent, from external sources mainly the multilaterals.

    “While this had a beneficial effect of developing the domestic debt capital market, the government became the dominant issuer to the extent that it has been regularly accused of crowding out the private sector.

    “The outcome was obviously not intentional, but to remedy the situation. The DMO deemed it fit to shift some of the borrowing activities to the international financial markets. This is also in line with its debt management strategy of achieving a portfolio mix of 60 per cent domestic and 40 per cent external.

    “Through the strategy, the share of domestic debt has been brought down from over 85 per cent to 77 per cent as at September this year.”

    Giving insights into the components the DMO director0general said: “The $5.5 billion is made up of two components, the first of which is $2.5 billion to part-finance the deficit in the 2017 Appropriation Act. The 2017 Appropriation Act included new borrowings of N1.254 trillion from the domestic market and N1.068 trillion equivalent of about $3 billion from external sources.

    “As at October 2017, only $300 million in the form of a Diaspora Bond had been raised leaving an unfunded balance of $3.2 billion. The other component of the $5.5 billion external capital raising is the $3 billion whose proceeds are to be used to repay some maturing domestic debt obligations.”

    Speaking on the benefits expected from borrowings, she said: “The DMO’s role in financing budget deficits  as provided in Annual Appropriation Acts, are to support  budget implementation and the attainment of the government’s economic targets. The $2.5 billion is specifically targeted at fulfilling the DMO’s mandate in this regard.

    “On the $3 billion for refinancing domestic debt, there are several benefits for the action. Firstly, it will reduce the crowding out effect that I earlier referred to thereby creating more space for other borrowers in the domestic market.

    “It also has the potential to bring about a reduction in lending rates which would make the cost of production of goods and services by the private sector cheaper and more price-competitive.

    “Another major benefit of raising external capital is a lower cost of borrowing to government and a moderation in debt service costs. As you know, United States (U.S.) dollar interest rates are much lower than naira interest rates. The $1.5 billion 10-year and $1.5 billion 30-year Eurobonds were issued at coupons of 6.5 per cent and 7.625 per cent per annum respectively.

    “These coupons are certainly much lower than the 15 per cent to 17 per cent that the government borrows at in the domestic market for shorter tenured funds. There is also the fact that the $3 billion is a direct accretion to Nigeria’s external reserves which are extremely useful for managing the naira exchange rate.”

    Ms. Oniha explained what accounted for the over-subscription of the Eurobonds by over $11 billion (about 400 per cent of the $3 billion that the government took) and her agency accepted less than the $5.5 billion approved by the National Assembly.

    Her words: “The demand of over $11 billion from international investors is a demonstration of their confidence in the policies and reform initiatives of President Muhammadu Buhari as well as the economic outlook of Nigeria.

    “Like those investors, we ourselves can attest to the economic improvements in Nigeria as demonstrated by higher external reserves, stable exchange rate, Gross Domestic Product (GDP) growth of 1.44 per cent in the third quarter of 2017 and improvement in the Ease of Doing Business.

    “Our intention was not to raise the $5.5 billion at once. Our first priority was to raise the $2.5 billion required for the 2017 budget while the $3 billion required for refinancing domestic debt will be in a phased manner.

    “Also, from a technical perspective, we still wanted to moderate the cost even in the International Capital Market by managing the supply of Nigeria’s Eurobonds in the market.”

    On the significance of the 30-year Eurobond being issued for the first time in the country, she said: “It is remarkable that international investors were willing to take a long term risk on Nigeria by buying the 30-year Eurobond. This feat is even more remarkable when we consider that South Africa which has a superior sovereign rating of BB- compared to Nigeria’s B+/B rating is the only sub-Saharan country that has issued a 30-year bond in the International Capital Market.

    “The other outstanding aspect of the 30-year Eurobond is its Pricing at 7.625 per cent which is lower than the coupon of 7.875 per cent on the $1.5 billion 15-year Eurobond issued earlier in the year.

    “In terms of its specific benefits to Nigeria, it provides the appropriate funds for financing infrastructure which is typically long term while also reducing the refinancing risk of the debt stock.

    “It will also serve as a benchmark for local and foreign institutions which may need to raise long term dollar funds to invest in Nigeria under various Private Public Partnership (PPP) arrangements for infrastructure as well as privatisation.”

    She said the fresh borrowings from the International Capital Market will not anyway worsen the country’s debt burden.

    The DMO chief said: “I want to re-assure Nigerians that the government’s borrowings are pre-approved by the executive and legislative arms of government and are used to finance various activities of the government as appropriated.

    “These layers of approvals ensure that the borrowings are both necessary and scrutinised before the DMO embarks on actual borrowing.    The increasing focus by the current administration of using borrowed funds for infrastructural development is a step in the right direction.

    “As borrowing is deployed to infrastructure to promote economic growth, the benefits of job creation and increased production among benefits are good for all Nigerians.

    “Besides, the debate on debt burden should therefore shift to actively supporting the government to increase revenue to levels comparable to the sub-Saharan average of 17 per cent of GDP. The other part of the argument about debt becoming a burden is the issue of Nigeria’s revenue base which at six per cent of GDP is not only low but well below that of peer countries.

    “Interestingly, government’s revenue is now being given proper attention. The measures to increase revenues are already yielding some results, and as this trajectory continues, the need for borrowing is expected to reduce while debt service will become an increasingly smaller portion of revenue.”

     

  • $350m Eurobond invested by govt, documents reveal

    $350m Eurobond invested by govt, documents reveal

    The $350million Eurobond facility  for the Nigerian Bulk Electricity Trading (NBET) Plc  is not missing, contrary to an observation by Senator Dino Melaye at plenary last week.

    The cash, which is with the Nigeria Sovereign Investment Authority (NSIA), was invested and the trial balance sheet is now over $380, 148,891.

    It was learnt that the government was shocked that Melaye misled the Senate by alleging fraud in the Ministry of Power, Works and Housing.

    Tthe over $1billion Eurobond was sourced by the administration of ex-President Goodluck Jonathan, according to a fact sheet released yesterday which also indicated that out of the $1billion Eurobond, about $350million went to the NBET, about $150million to the Transmission Company of Nigeria (TCN)  and about $500million for the Nigerian National Petroleum Corporation (NNPC).

    The document indicated that since there was no “urgent need for the $350million by NBET” in January 2015, former Minister of Finance Dr. Ngozi Okonjo-Iweala advised that it should be placed with the Nigeria Sovereign Investment Authority (NSIA) to yield interest.

    Okonjo-Iweala, who was conscious of the transition to a new government, took the step to avoid the funds being tampered with.

    The document stated: “As at period ended 30 September 2017, the total managed fund of NBET was $380, 148, 891 signaling an interest of over $30million.

    “The breakdown of the investments is available at the Nigeria Sovereign Investment Authority (NSIA). No cash is either missing or stolen.

    “No amount can be withdrawn by any supervising Minister or NBET except by the express approval of the President, who has not given such permission.

    A top government source, who spoke in confidence, said: “I think the Senator should have been more diligent by asking for details from the appropriate ministry or agency instead of raising false alarm that the Buhari administration has spent the $350million. He could as well invoke the FOI Act to obtain all relevant documents.

    “Melaye simply misled his colleagues by saying emphatically that the cash had been withdrawn and shared.”

    On other issues raised, the government source added: “All the facts will be made available to the National Assembly.”

    Melaye , who is expected to move a substantive motion on the $350million on Tuesday said:  “In July 2013, the Federal Government raised $1billion from Eurobond issue from which $350 million was given to NBET (Nigerian Bulk Electricity Trading (NBET) Plc) in 2014. This money was stolen in installments .”Sometime last year, again, the Ministry of Power came up with an idea of a project they called Afam Fast Power. This project is supposed to build new generating plants to add power to our grid.

    “There are a few questions we need to ask and that is why I need the nod of the Senate to bring a substantive motion on the next legislative day.”

    “Up till date, there is no detail on building new generating plants or a feasibility study. There is no appropriation by the National Assembly for these projects.

    “The ministry has spent so far $35 million on the Afam Fast Power Project which has no appropriation or detailed feasibility study. How and when was this money appropriated? We need to find out. How was $29million purportedly paid to General Electric for turbines when $6 million was paid to others?”

    ”We need the Senate to investigate this after moving a substantive motion. I ask this house to give us the opportunity to continue with the true anti-corruption fight of the Federal Republic of Nigeria.”

    Read Also: Senate queries misuse of $1.35b power sector funds

  • $5.5b Eurobond: Govt eyes December deadline

    The Federal Government will, through the Debt Management Office (DMO), raise $5.5 billion from Eurobonds sales latest by December, The Nation has learnt.

    This will bring the total funds raised through the Eurobond –International Capital Market (ICM) by the Federal Government to $7 billion in less than one year. A total of $1.5 billion was previously raised in two tranches of $1 billion and $500 million.

    In a report released yesterday by FBN Capital Research, titled: Job done by the DMO Yet Still More to Do, the investment and research firm said, the debt office approaches this week’s regular auction of Federal Government of Nigeria (FGN) bonds from what appears a position of strength.

    “It has already met its target of N1.25 trillion in domestic financing of the 2017 FGN budget deficit. It has collected N1.26 trillion (gross) from the nine monthly auctions held to date, and is looking to raise a further N100 billion from the reopening of the five and 10-year benchmarks,” it said.

    The report said the bid for the offer has been strongest for the 20-year paper, which is not on offer this month or indeed for the rest of the quarter.

    “In the secondary market, the yields on the two issues on offer this week have declined by about 110 basis points since the last DMO auction, to 14.88 per cent for the July 21s and 14.81 per cent for the March 27s on Friday. The authorities will be hoping that the bid will be healthy and conceivably match September’s (N395 billion), with a strong offshore element,” it said.

    The report said that while the DMO has bought itself some room for manoeuvre due to its textbook front-loading of issuance, it knows that it may have to raise additional funds because the 2017 budget deficit is almost certain to overshoot the projected N2.36 trillion in view of poor non-oil revenue collection.

    At the same time, it may have to adjust its strategy for the uncertainties surrounding the attainment of the target of N1.07 trillion (US$3.5 billion at the budget rate of N305) for external financing of the deficit. We await patiently the National Assembly’s go-ahead for these sales and for the FGN’s planned debt restructuring.

    In a related report, Sub-Saharan Africa Economist, at Renaissance Capital (RenCap), Yvonne Mhango said, the plan to borrow $5.5 billion through Eurobonds will raise the country’s debt service to revenue cost beyond 62 per cent.

    She said capital releases for the 2016 budget continued into the first quarter of this year while public debt has increased by seven percentage points of Gross Domestic Product (GDP) since 2014.

    On the debt service/revenue, she said: “Nigeria’s debt service/revenue has risen sharply in recent years to 62 per cent at June 2017 against 29 per cent in 2014. This largely reflects the Federal Government’s low revenue/GDP target of four per cent this year. The Federal Government plans a $5.5 billion Eurobond issuance before year-end 2017, as part of its efforts to lower local interest rates, by reducing domestic debt/total public debt to 60 per cent, against over 70 per cent today”.

    Mhango said budget performance in the first seven months of this year and debt developments showed there were no capital releases for the 2017 budget, because it was passed late. She said the Federal Government’s 2017 budget of N7.4 trillion was 6.2 per cent of GDP, and was signed by the executive, after being passed by the Senate in May.

    Of this, N3.1 trillion (2.5 per cent of GDP) was spent in seven month. “Expenditure in seven month was 30 per cent below the (pro-rata) target and was entirely made up of recurrent spending. There were no capital releases from the budget because of its late approval. However, capital releases did take place in seventh month, as the 2016 budget continued to be implemented into first quarter of this year,” she said.

    Mhango said revenue came in on target, at N2.6 trillion (2.1 per cent of GDP) because of a one-off refund from the Paris Club. “When this is stripped out, there was a 20 per cent shortfall in revenue. Below-target spending – due to delayed capital releases – explains the small budget deficit for seven month of 0.8 per cent of GDP, by our estimate, as against the 1.5 per cent (pro-rata) target,” she said.

    She disclosed that the federation account revenue was one-third below target, and that three-quarters of the FGN’s planned revenue for this year is expected to come from the Federation Account, of which two-thirds will stem from oil revenue.

    She, however, said Nigeria’s public debt/GDP is low as against the Sub-Saharan African average of 45 per cent, but it has seen a strong increase in recent years, adding that since 2014, it has risen by seven percentage points of GDP to 16.4 per cent of GDP in June 2017, with 70 per cent of the increase due to domestic debt.

  • Eurobond: Fed Govt, UBA, Zenith raise $2.5b

    Eurobond: Fed Govt, UBA, Zenith raise $2.5b

    • Fitch, S&P to rate more banks

    • Rush for Eurobond continues

    The Federal Government and two commercial lenders have raised $2.5 billion through Eurobond in the last four months. The Federal Government raised $1 billion in February and $500 million in March while Zenith Bank Plc and United Bank for Africa (UBA) Plc raised $500 million each within the periods.

    The Federal Government’s $1 billion Eurobond offer, the fourth since 2011, was oversubscribed by nearly 800 per cent. The over-subscription surprised not a few pundits.The offer, which comes at $200,000 denominations and multiples of $1,000 denominations, will mature on February 15, 2032, with Citigroup Global Markets Limited and Standard Chartered Bank. Stanbic IBTC Capital is the Financial Adviser.

    In March, the government announced that it has priced its offering of the $500 million aggregate principal amount of notes at a yield of 7.5 per cent. The terms and conditions of the $500 million notes,were identical to those of the Original Notes, $1 billion Eurobond, paying a coupon of 7.875 per cent per annum and maturing on February 16, 2032.

    Zenith Bank’s and UBA’s Eurobond offers were both over-subscribed too. Zenith Bank raised $2.1 billion through Eurobond 2022 issue which was more than 300 per cent oversubscribed.The $500 million five-year senior unsecured benchmark bond (144A/REGS) was issued by the Tier-1 lender on the Irish Stock Exchange (ISE).

    The bank’s Eurobond issue recorded success on three counts: pricing, subscription level and global appeal. Details of the issue show that the subscription level makes the issue highest by any non-sovereign and non-supranational company in sub-Saharan Africa. The issue, the lender said, is in addition to the existing $500 million which matures in April, 2019.

    The bond was issued at par with both coupon rate and yield to maturity rate priced at 7.375 per cent, representing 50 basis points better than the sovereign of 7.875 per cent. The rating of both the sovereign and Zenith Bank is B+ with the bond issue also rated B/B+.

    Zenith Bank Plc established a $1 billion Global Medium Term notes in 2014, with $500 million already raised in the first tranche. The first tranche notes were listed and admitted to trading on the Irish Stock Exchange in 2014. The net proceeds of the Second Tranche Notes would be utilized for its general banking business.

    UBA raised $500 million from international investors through Eurobond. Investors in the bond, the Tier-1 lender said, came from different parts of the world, including the United Kingdom, Europe, Asia, the Middle East and the United States.

    The dollar-denominated bond, which was first of such offer by the bank, was 240 per cent oversubscribed. The significant investor demand, analysts say, reflects the strong global investor appetite for the bank’s credit and support for the group’s pan-African financial services strategy.

    UBA, which is a leading pan-African financial institution, offers banking services to more than 14 million customers, across over 1,000 business offices and customer touch points in 19 African countries.

    The $500 million Eurobond by the lender is a five-year senior unsecured benchmark bond (144A/Reg S) listed on the Irish .

    The bank said fund realised from the offering will further support the group’s strategic vision, as it continues to grow its franchise across the continent and client segments.

    The bond, which is rated by both Fitch (B, stable outlook) and S&P (B, stable outlook), matures in June 2022 and was issued with a coupon rate of 7.75 per cent, priced at an effective yield of 7.875 per cent.

    Between 2011 and 2013, the lenders have raised $3.9 billion from the Eurobond market as Tier-2 capital (additional capital). In 2014, over $1.9 billion was also raised, especially through Eurobond issuances.

    Currencies Analyst at Ecobank Nigeria, OlakunleEzun, saidEurobond issuances come at attractive rates relative to the domestic market and presently have many viable on-lending outlets.

    He   noted that for the first time in Nigeria’s economic history, the private sector has been enabled to access long-term funds from both the domestic and international capital markets.

    According to Ezun, the 2017 budget shows that both government and private sectors will continue to borrow, adding that more lenders will go for Eurobond because it is cheaper.He said any interested lenders have to submit themselves to rating by two international rating agencies- Fitch Ratings and Standard &Poors (S&P). He said many banks will approach the International Capital Market to raise more funds in the coming months as majority of them are already being rated by the global rating agencies.

    But analysts  admitted the danger of potential pressure that may arise upon the payment of coupon on Eurobonds raised by banks adding that the lenders will require the dollar bi-annually to fulfill obligations to Eurobond holders.

     

     

  • UBA raises $500m through Eurobond

    UBA raises $500m through Eurobond

    United Bank for Africa Plc (UBA) has raised $500 million from international investors through Eurobond.

    The Tier-1 lender said investors in the bond came from United Kingdom, Europe, Asia, the Middle East, United States and other parts of the world.

    The dollar-denominated bond, which was first of such offer by the bank, was 240 per cent oversubscribed.

    The significant investor demand, analysts said reflected the strong global investor appetite for the bank’s credit and support for the group’s pan-African financial services strategy.

    UBA Plc, which is a leading pan-African financial institution, offers banking services to more than 14 million customers, across over 1,000 business offices and customer touch points in 19 African countries.

    The $500 million Eurobond is a five-year senior unsecured benchmark bond (144A/Reg S) listed on the Irish Stock Exchange.

    The bank said the fund realised from the offering will further support the group’s strategic vision, as it continues to grow its franchise across the continent and client segments.

    The bond, which is rated by both Fitch (B, stable outlook) and S&P (B, stable outlook), matures in June 2022 and was issued with a coupon rate of 7.75 per cent, priced at an effective yield of 7.875 per cent.

    The Group Managing Director/CEO of UBA Plc, Kennedy Uzoka, said the acceptance of the offering shows strong confidence global investors have in the bank.

    “This successful dollar-denominated offering further illustrates global investor confidence in the strong fundamentals of our group. The $500 million bond will complement our stable funding base and support the growth of our balance sheet and the overall business. More importantly, this medium-term funding will further enhance our strength in financing profitable and impactful projects on the African continent,” Uzoka said.

    Also speaking on the Eurobond, the UBA Group Chief Finance Officer, Ugo Nwaghodoh, described the offering as timely and will help the group achieve its growth objectives:

    “UBA’s debut global offering is another milestone for us. It is timely in the group’s growth phase and aligns with our strategic plan to profitably grow the balance sheet, as we maintain our prudent risk management and benchmark asset quality ratios,” the bank’s finance chief said.

  • Reps approve FG’s Eurobond request

    The House of Representatives has approved Federal Government’s request for the issuance of $500 million Eurobond at international capital market to fund the 2016 budget deficit.

    The House in February mandated the Committee on Aids, Loans and Debt Management headed by Adeyinka Ajayi (APC-Osun), to consider the federal government’s request for additional $500 million Eurobond to be raised through the International Capital Market (ICM) to further finance the 2016 budget.

    The House after the consideration and adoption of the Committee report on Wednesday mandated the Committee to monitor the disbursement of the approved $500 million Eurobond as specified in the 2016 Appropriation Act, to ensure compliance.

    The Committee said in its report that the Eurobond performance has down trend which showed that the investors are showing interest in the Nigerian bond.

    “Therefore the interest rate is falling which implies that Nigeria can get the bond at a better rate. It also indicates that the international community rating of Nigerian economy is high,” it added.

  • Saraki, Dogara update Buhari on NASS activities

    Saraki, Dogara update Buhari on NASS activities

    The leadership of the National Assembly, led by Senate President Bukola Saraki, on Tuesday briefed President Muhammadu Buhari on the activities of the National Assembly while he was away in London.

    Speaking after the closed door meeting with the president, Saraki, who was accompanied by the Speaker of the House of Representatives Yakubu Dogara, said they were delighted that the president was back in his office.

    According to Saraki, “The president met with us. We were there for over 40 minutes. I was not talking to myself. So, you know he was responding.

    “We were engaging. He engaged us very well. We discussed issues of national interest, we are well happy to see him back, he is back at the office, and he is doing his work.

    “Budget is ongoing. The economy, things that we passed in his absence including the (Chief Justice of the Nigeria) CJN issue; issue to do with the Eurobond.

    “Just general issues that are pending and some other issues like the ambassadorial nominees, stability in the Niger Delta – a lot range of issues we covered in the short period of time,’’ he said.

    On the 2017 budget proposal, Saraki said that it would be passed before the end of March.

    The News Agency of Nigeria (NAN) reports that on Dec. 14, 2016, Buhari presented a budget of N7.30 trillion for 2017 before a joint session of the National Assembly.

    Also, Dogara pledged that the National Assembly would continue to collaborate with the presidency to achieve the desired goal of uplifting the quality of life of all Nigerians.

    Dogara added, “We expect to cooperate more than we fight in the interest of our people to ensure that there is progress. It is one government, there is no division.

    “If he (President Buhari) fails we all failed.

    “So, it is in realisation of this that we always extend the needed support to ensure that he succeeds so that our government will be rated as a successful one,” he said.

     

  • Stock Exchange lists Nigeria’s $1b Eurobond

    Stock Exchange lists Nigeria’s $1b Eurobond

    The Nigerian capital market recorded a milestone yesterday with the listing of the $1 billion Eurobond issued by the Federal Government on the Nigerian Stock Exchange (NSE). The $1 billion FGN Eurobond issued under Nigeria’s newly established Global Medium Term Note programme is the first foreign currency denominated security to be listed and traded in the Nigerian capital market.

    The $1 billion Eurobond has a tenor of 15 years with redemption in 2032 and a coupon rate of 7.875 per cent. The issue was oversubscribed by 780 per cent, prompting the Nigerian government to set in motion process for a supplementary issue of $500 million.

    Director General, Debt Management Office (DMO), Dr Abraham Nwankwo, said the listing of the Eurobond demonstrated the commitment of the DMO and the government to democratize the enefits of government debt issues so that the general Nigerian investing public can have the opportunity to participate in the value creation.

    “We want to create access, we want to create inclusiveness,” Nwankwo said, adding that government is committed to deepening the domestic capital market.

    He pointed out that the net proceeds of the Eurobond would form part of the funding for the 2016 capital expenditures as outlined in the national budget, assuring that Nigerians will see the benefits of the foreign debt issuance in the areas of key infrastructure projects.

    He assured that the government has enough monitoring agencies to ensure that the net proceeds from the debt issue is used in line with the stated objectives and the overall economic plan of the government.

    He also noted that the government would also continue to be mindful of the crowding out effect of its domestic bond issue, pointing out that the decision to shift the larger portion of debt issue to the international market was a deliberate attempt to decelerate domestic issuance and allow corporate issuers to take more advantage of the market after it has been developed by the government.

    In his remarks, executive director, market operations and technology, Nigerian Stock Exchange (NSE), Mr Ade Bajomo noted that Nigeria’s infrastructural gaps have long been identified as probably the core constraint limiting the realisation of the country’s economic potential.

    According to him, the achievement and sustainability of Nigeria’s growth and developmental objectives depends on a well-functioning and efficient capital market; enabling aggregation of – and access to – long term capital to support business and developmental needs.

    He reiterated the commitment of the NSE to supporting the government in achieving its developmental objectives by continuous innovation and championing the growth of the Nigerian capital market.

    “The Exchange offers issuers access to a highly diversified investor base, deep pools of capital, a wide and growing breadth of products to meet their specific business financing needs, as well as global visibility to support their corporate ambitions; whilst also ensuring adequate protection, transparency, and liquidity to investors,” Bajomo said.

    He pointed out that as a foreign-denominated instrument, the Eurobond will trade and settle in Dollars, its currency of issuance; thus setting the foundation for multicurrency capital raising and trading in the domestic market, which will open up hybrid capital raising options and create additional portfolio diversification opportunities for investors.