FG raises $1bn eurobond to finance 2016 budget

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…Bond oversubscribed by 800% despite recession

From Uche Usim, Abuja

The Federal Government, Thursday, successfully raised $1 billion in its return to the Eurobond market in what signifies global investors’ endorsement of the Federal Government’s economic recovery initiatives.

The issue was 750 per cent oversubscribed, underscoring how buoyant investor appetite for scarce frontier African paper, despite recent selloffs in emerging market assets. The global medium term note programme of $1,000,000,000 is due to mature in 2032.

It was a day of international acknowledgement and endorsement of the Debt Management Office (DMO) continued strategy in a peculiar challenging local and global economic landscape.

The DMO defied all known predictions by international financial and capital market analysts to prove that Nigeria’s economy remains resilient and robust in the international capital market during the issuance of the nation’s first 15-year maturity $1 billion  Eurobond.

Africa’s top oil producer issued $1 billion 15-year bond at a 7.875 coupon at a most turbulent time of its economic history. The feat shows an unambiguous resilience of the Nigerian economy and strength, particularly in terms of effective bullish public debt management record.

Market players had feared that the Eurobond issuance will meet brick wall due mainly to the country’s foreign exchange policy, which has seen the Central Bank of Nigeria (CBN) controlling the exchange regime. Many stakeholders and international financial market analysts had premised at the Eurobond Roadshow in London, Los Angeles and New York that government’s control of the forex regime will adversely impact on the fortunes of the Eurobond.

Commenting on the sale, Minister of Finance, Mrs. Kemi Adeosun, said: “Nigeria is implementing an ambitious economic reform agenda designed to deliver long-term sustainable growth and reduce reliance on oil and gas revenues while reducing waste and improving the efficiency of government expenditure.”

For his part, the DMO Director General, Dr. Abraham Nwankwo, said: “Nigeria is delighted to have successfully priced its third Eurobond issue. We have successfully extended the tenor of our borrowing programme in the international capital markets to 15 years, at a price that reflects belief in the quality of Nigeria’s cash flows and government.”

The Eurobond is the latest step in a broader debt strategy designed to significantly re-balance our debt profile towards longer term financing and reduce the burden of interest on our annual budget.”

In 2013, the Federal Government issued a $1 billion Eurobond but in two tranches of $500 million each for five and 10 years’ maturity each. 2011 was the debut outing of $500 million with maturity period of 10 years.

The Federal Government will take advantage of this success to reflate an economy in recession and the otherwise turbulent market.

Egypt, with a higher credit rating issued a 10-year Eurobond at 7.5 per cent compared to Nigeria’s 15-year at 7.875, showing that Nigeria has a stronger performance in view of the longer maturity tenor.

Commenting following the successful pricing, the Minister of Finance, Mrs. Kemi Adeosun, said: “Nigeria is implementing an ambitious economic reform agenda designed to deliver long-term sustainable growth and reduce reliance on oil and gas revenues while reducing waste and improving the efficiency of government expenditure.

“At the heart of the agenda is a commitment to invest in developing Nigeria’s infrastructure through a target 30 per cent annual budget commitment to capital expenditure. We are establishing the building blocks for long-term growth and making the hard decisions that must be made to reset our economy appropriately.”

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