The Nigerian Government has successfully raised $2.2billion in its latest Eurobond auction.
The money was raised from bonds maturing in 2031 (6.5 years) and 2034 (10 years) from investors from across Europe, Asia, North America, and Nigeria with the sums of $700 million raised for the 6.5-year bond priced at a 9.625% interest rate and a sum of $1.5 billion for the 10-year bond priced at a rate of 10.375%.
Reason For the Eurobond Auction
This auction marked the return of Nigeria to the international capital markets after two years away. It was carried out to plug the deficit in the country’s 2024 budget.
Nigeria last traded on the international capital market in March 2022, when the country raised $1.25 billion at a rate of 8.375 percent through a seven-year Eurobond.
The proceeds from the Eurobond are expected to be used to finance infrastructural projects and aid in economic development across the country.
Announcing the bond last week, Nigeria’s minister of Finance, Wale Edun said “The first objective is to complete the federal government’s external borrowing program with the approval of the $2.2 billion financing package, which will include access to the international capital market through a combination of Eurobonds and Sukuk bonds—approximately $1.7 billion from the Eurobond offer and $500 million from Sukuk financing,”
Who Manages The Bond And Where Will it be Listed?
The Eurobond sale is managed by a consortium of international and domestic financial institutions, including Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., and Standard Chartered Plc, with Chapel Hill Denham Advisory Limited acting as the Nigerian bookrunner.
The bond is expected to be listed on the London Stock Exchange’s Main Market with the transaction settlement slated for the 9th of December, 2024.
Policy Makers Speak on the Significance of Eurobond Auction
At the end of the oversubscribed Eurobonds, Nigeria’s financial policymakers expressed deep satisfaction with the auction.
Mr. Wale Edun, Nigeria’s coordinating minister for the economy stated “Today’s successful bond issuance signposts increasing confidence in the ongoing efforts of president Bola Ahmed Tinubu, GCFR, administration to stabilize the Nigerian economy and position it on the path of sustainable and inclusive growth for the benefit of all Nigerians.
“The broad range of investor appetite to invest in our Eurobonds is encouraging as we continue to diversify our funding sources and deepen our engagement with the international capital markets.”
Central Bank of Nigeria Governor Olayemi Cardoso on his part noted the auction subscription was a reflection of public confidence in the current administration’s efforts.
“This outcome underscores the growing confidence of investors and the resilience of the Nigerian credit, and evidence of our improved liquidity position and continued access to international markets to support the financing needs of the government.”
Director General of the Debt Management Office, Patience Oniha said “With the successful pricing of the notes on an intra-day basis, Nigeria has registered a landmark achievement in the international capital market.
“The size of the order book at approximately 4.18x of the offer amount and the strong and diverse investor base helped to price the new 6.5year at 9.625% while new 10-year notes were priced at 10.375%.
“The DMO remains committed to maintaining transparency and open communication with investors and stakeholders and appreciates the continued confidence and support of the international and Nigerian investors who participated in the pricing”.
Conclusion
The amount raised from the Eurobond is to be used in financing deficits in the 2024 budget which has continued to rise due to a drop in global oil prices, low tax revenue, and the slow pace of Nigeria’s economic diversification efforts.
