Federal Government raises $2.86 billion from Eurobond

In a notice posted on its website, the Debt Management Office (DMO) has announced Nigeria’s successful raise of $2.86 billion through its latest Eurobond.

This is the country’s sixth Eurobond issue following its maiden debut in 2011, issuances in 2013, two in 2017, and one issued in February this year.

The Joint Lead Managers for the issuance were Citibank Global Markets Limited and Standard Chartered Bank, while FSDH Merchant Bank Limited was financial advisors.

How much was raised?  

The bonds comprise of a US$1.18 billion 7-year series, US$1.00 billion 12-year series and a US$750 million 30-year series. The 7-year series will bear interest at a rate of 7.625%, while the 12-year series will bear interest at a rate of 8.75%, and the 30-year series will bear interest at a rate of 9.25%.

The offer also marks Nigeria’s first triple tranche offering.

Rates are higher 

While the DMO stated that the bonds attracted significant interest from leading global institutional investors with a peak combined order book of over US$9.5 billion which reflects an over-subscription of more than 3 times, rates were much higher, partly as a reflection of the elevated macroeconomic risk and the US tightening interest rates.

The $2.5 billion issue raised in February comprising a $1.25 billion 12-year series and a $1.25 billion 20-year series was raised at interest rates of 7.143% and 7.696% respectively.

What will the proceeds be used for?  

Minister of Finance, Zainab Ahmed disclosed that proceeds of the issue will be used to fund capital projects.

“The proceeds of this issuance will provide critical financing for projects in transportation, power, agriculture, housing, healthcare and education as well as the capital elements of our social investment programMEs.”

What is a Eurobond?  

Eurobonds are bonds that are issued in a currency other than that of the sovereign nation (in this case, Nigeria).

Lower interest rates and a desire to reduce the crowding out effect of the Federal Government in the country’s debt market have led to an increase in foreign debt issuance.

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