Nigeria returns to debt markets with $1bn Eurobond

Nigeria has successfully gone to the bond markets in an effort to get infrastructure investment back on track as a rising oil price and government promises on reform have improved sentiment.

 Investor interest in the west African nation’s $1bn Eurobond with a coupon of 7.875 per cent proved higher than anticipated and it was almost eight-times subscribed.

Almost a full year of effort to tap international markets had come up short with the country falling in to recession last year for the first time since 1991, as the crash in oil prices hammered Africa’s top exporter.

Kemi Adeosun, the finance minister, said that the government’s economic reform plans centred on “a commitment to invest in developing Nigeria’s infrastructure through a target 30 per cent annual budget commitment to capital expenditure”.

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The paper has a 15-year tenure and is the country’s third Eurobond sale, following issuances in 2011 and 2013. It is the longest ever maturity for a Nigerian issuance.

Last year, funding for infrastructure investment fell well short of target. The budget deficit soared to more than $7bn amid militant attacks in the oil-producing region and low oil prices. The 2017 budget has not yet been passed.

Investors said that rising oil prices had made the country a more attractive prospect, as did government assurances about reform plans.

Nigeria was largely locked out of global debt markets last year by prohibitively high borrowing rates.

The administration of President Muhammadu Buhari has faced criticism from investors for delaying a currency devaluation and sticking to a pegged rate until the middle of last year. The naira lost a third of its official value after the devaluation.

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“While it’s easy to focus on the negatives when it comes to Nigeria, in particular the underwhelming FX adjustment, I think there were a few things that came out on the roadshow that investors could get their hands around, such as improved oil production and an amnesty programme for the Delta that should help to reduce sabotage of the pipelines,” said Kevin Daly at Aberdeen Asset Management.

Citi, Standard Chartered and Stanbic IBTC arranged the bond sale.

 

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