FG names Deutsche Bank, CitiGroup as advisers for $1bn eurobond issue

Baring any last minute changes, the Federal Government will likely name Deutsche Bank and CitiGroup as the lead international advisers for the proposed $1bn eurobond about to be issued in the international capital market this month, BusinessDay has been told.
The choice followed what a top presidency official called a “very fair and open process” that saw about 38 international fund managers and about 79 firms locally assessed for the job.
Citi Bank Nigeria has also been selected as the local partner, while Banwo and Ighodalo has been selected  as the legal partners to the issue.
Nigeria is about to relaunch its presence at the international capital market to fund N2.2 trillion-budget deficit as government finances come under acute pressure on soft oil prices. It had also applied for $500m budget support from the World Bank and $1bn from the African Development Bank. Some other funding is also being expected from agencies like the China EXIM Bank, according to the finance ministry.

Just last week, the Africa Development Bank confirmed its board has approved $600 million out of the $1bn budget support request by the country.
The Eurobond sales this year is the first tranche of a $4.5 billion Nigeria Global Medium-Term Notes Issuance Programme that runs through 2018.

If successful, the $1bn eurobond will be the first issuance of external debt by Nigeria since July 2013, when it raised $500m of five-year bonds and $500m of 10-year bonds, at yields of 5.38 per cent and 6.63 per cent respectively.
But the country had first tapped international debt markets in January 2011, whetting investor appetite for African debt. Since Nigeria’s debut, Angola, Zambia, Namibia, Tanzania, Rwanda and Ghana have all issued inaugural international bonds, according to the Financial Times of London.

Last year, Nigeria was ejected from influential indices of EM bonds by JPMorgan and Barclays, citing challenges with foreign exchange policies, which they said made transactions problematic for foreign investors.
The top official at the presidency, who confirmed the pick to BusinessDay, said government would announce the pick any moment. But the list would first go through the usual rigors of the Bureau for Public Procurement (BPP) before finance minister, Kemi Adeosun presents the names to President Buhari and then the Federal Executive Council (FEC).
“Until then, no public announcement is possible,” the source stressed, adding “We are still on course for November issuance.”
The source also confirmed that unlike in the previous deals, there are also communication advisers- a third party contracted this time, to help sell the bond, promote the Nigerian story  and attract investors.

The source said the technical advisers, who basically were also used for the previous eurobond issues, are preferred due to “their huge experience, track record and having done it before for us.”
Minster Adeosun led Nigerian officials on a one-week roadshow in June, to meet investors,  but the turmoil in the international markets after Brexit, delayed the bond sale.
Despite the turmoil in the market and Nigeria’s present economic challenges, Adeosun insists that the eurobond issue, just like the previous ones, would record a huge success looking at responses from investors. But some analysts who spoke earlier in the year, expressed some nervousness around  possible yields.
Ike Chioke, Managing Director, AFRINVEST  said with good advisers, Nigeria should be able to raise the proposed amount in the international market, but noted that the country’s macro economic situation could still pose a challenge.
Chioke said, “Clearly,  there has to be better alignment in resolving our domestic macroeconomic issues, which also will reflect how international bond investors will look at an international euro bond issuer like Nigeria.

He raised hope however that, “considering that Nigeria is a repeat issuer, we may quickly raise a sizeable amount of money, instead of half a billion to one billion dollars within a matter of months. That can be achieved, all things being equal.”