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Investors rush Nigeria’s $1b bond

By on July 5, 2013

Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala has said that International investors have exceeded the expectations of analysts in their response to the recently floated $1 billion Nigerian bond; marking an improvement on investor response to the first bond floated in January, 2011.

Okonjo-Iweala who spoke in Abuja Wednesday, said the positive response to the bond which had been oversubscribed four times was anchored on a strong perception that the fundamentals of the Nigerian economy remain strong despite recent challenges.

She said, “This is very good news for the country. It shows that the international investors are confident that the Nigerian economy is being well managed and that the future of the Nigerian economy remains bright.

“Investors are not sentimental people. They vote with their pocket. So if they are responding this way, then it is really significant. At a challenging time for the global economy like this when investors are running away from other emerging markets, this is a source of encouragement and a vindication for the manner the economy has been managed by the administration of President Goodluck Jonathan.”

The Minister said the success level of the two new Nigeria international bonds against the backdrop of volatile financial markets in which only a few new deals were priced, is further captured in the high levels of subscription recorded for each of the two new issues and the ability to tap both the medium and long-term parts of the yield curve.

“The two tranche offering gave Nigeria the opportunity to achieve an overall cheaper cost of borrowing (the 5-year Bond was priced 125 bps cheaper than the 10-year Bond) while also creating new 5-year and 10- year Sovereign Benchmark reference points” she said.

Reacting, the Director-General of the Debt management Office, Dr Abraham Nwankwo described the bond as a testament to sound economic management and hard work by the Federal Government.

On July 2, 2013 Nigeria successfully returned to the markets with a USD 1 billion dual-tranche international Bond offering: USD 500 million 5-year Bond and USD 500 million 10-year Bond at Coupons of 5.125% and 6.375% p.a., respectively.

The issuance came on the back of highly volatile international financial markets, which saw sharp drops in prices of equities and bonds following expectations of a tapering of Quantitative Easing by the U.S. Federal Reserve Bank.

The transaction marked the largest international public benchmark bond issuance from a sub-Saharan African Sovereign in 2013 year-to-date and testifies to investors on- going interest in the unlocked potentials in Nigeria.

[Daily Independent]