Budget 2018 Funding: FG’s $3bn Dual Series Bonds To Attract 6.5%, 7.625% Yields

Budget 2018 Funding: FG’s $3bn Dual Series Bonds To Attract 6.5%, 7.625% Yields

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Post Views: 401 • For Listing On LSE, May Be Traded On NSE, FMDQ The Federal Government says it plans to issue a $3bn aggregate principal amount of it...

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• For Listing On LSE, May Be Traded On NSE, FMDQ

The Federal Government says it plans to issue a $3bn aggregate principal amount of its 10 and 30-year dual series notes under its US$4.5 billion Global Medium Term Note programme at a yield of 6.500% and a 30-year benchmark at 7.625% respectively.
The Notes comprise a US$1.5bn each of 10 and 30-years with bullet repayment of the principal on maturity.
A statement by Oluyinka Akintunde, Special Adviser, Media & Communications to the Minister of Finance, Mrs. Kemi Adeosun, noted that the offering, which has attracted significant interests from leading global institutional investors, will close on or about 28 November, 2017, subject to the satisfaction of various customary closing conditions.
When issued, he explained further, “the Notes will be admitted to the official list of the UK Listing Authority and available to trade on the London Stock Exchange’s regulated market.”
Nigeria may apply for the Notes to be eligible for trading and listed on the Nigerian FMDQ OTC Securities Exchange and the Nigerian Stock Exchange (NSE).
Pricing of the bond, the statement explained, was determined during a recent roadshow led by Mrs. Adeosun; her Budget and National Planning counterpart, Senator Udoma Udo Udoma; Governor of the Central Bank of Nigeria, Godwin Emefiele; the Director-General of the Debt Management Office (DMO), Ms. Patience Oniha, and the Director-General of the Budget Office of the Federation, Ben Akabueze.
Proceeds of the notes would be used for funding the budget and refinancing of domestic debt.
The Notes, the statement continued, represent the Nigeria’s fourth Eurobond issuance, following issuances in 2011, 2013 (two series) and earlier in 2017, quoting Adeosun as saing: “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.
“Our economy is beginning to recover, Gross Domestic Product (GDP) having returned to growth in 2017, but we must maintain the momentum behind our investments in order to further drive growth. That is why we are, and will continue to focus investment on the enabling infrastructure we need to broaden economic productivity.
“Successfully extending out debt profile in the international market to 30 years is a key element of that strategy as it establishes a basis for the longer term financing required for transformational infrastructure investment.
“As we have always stated we are progressively replacing debt with revenue, which is reflected in the 2018 Budget proposal. We are establishing the building blocks for inclusive growth and beginning to see the results of the hard decisions that have been made to reset our economy appropriately.”
Also commenting on the Notes’ pricing, Mrs. Oniha believes that the successful pricing places Nigeria among “the few African issuers whose securities have attracted strong investor interest amongst institutional investors across the globe.
“This time Nigeria issued a new 10-year bond at a yield of 6.500% and a 30-year benchmark, priced at a yield of 7.625%, which despite the longer tenure remains cheaper than our 15-year issuance earlier this year.
“The 30-year is a landmark as the tenor represents the first by a sub-Saharan country other than South Africa and importantly establishes the basis for long term infrastructure funding, which is a priority for this government,” she added, expressing satisfaction with the international investors’ recognition of Nigeria’s huge potential.
“Perhaps even more important is that with this dual tranche issuance the objective of reducing the cost of government borrowing has been achieved,” she added.

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