FG $300m Diaspora Bond to boost external reserves, enhance infrastructure investment

The country’s external reserves which currently stand at $30.28 billion as at June 8,2017, are expected to shore up the most, following the Federal Government’s commencement of the global offering of its $300 million ‘Diaspora Bonds’.

The Federal Government had earlier disclosed its plans to float a $300 million Diaspora Bond as part of measures to spur the buy-in of foreign-based Nigerians into the Economic Recovery and Growth Plan (ERGP) launched recently.

The bond price is expected, following the completion of the road show which begins tomorrow June 13, 2017, subject to market conditions, says the Federal Government, in a statement on Thursday June 8.

Consequently, the Federal Government said a registration statement relating the bond has been filed with the United States Securities and Exchange Commission but has not yet become effective.

Also, an application will be made to the Financial Conduct Authority in its capacity as competent authority (the UK Listing Authority) for the bonds to be admitted to the official list of the UK Listing Authority and to the London Stock Exchange plc, for the bonds to be admitted to trading on the London Stock Exchange’s regulated market.

The bond will be denominated in U.S Dollars and will have the Bank of America Merrill Lynch and Standard Bank of South Africa Limited, as the International Joint Lead Managers with First Bank of Nigeria Limited (FBN) and United Bank for Africa Plc (UBA) as the Nigerian Joint Lead Managers.

Reacting to the development, Johnson Chukwu, managing director/CEO, Cowry Asset Management limited said the Diaspora Bond if successful, will boost external reserves and enhance FG’s investment in infrastructure.

Chukwu based his optimism on the Nigerian Diaspora’s capacity in this regard. “I doubt if Nigerian Diasporas have surplus unit in their residence, as to easily subscribe to Diaspora Bond”, he told BusinessDay by phone.

Tajudeen Ibrahim, head of research at Chapel Hill Denham, sees the Federal Government’s move as a welcome development, as it would lead to including Nigerian Diasporas in the developmental projects in the country.

Ibrahim told BusinessDay by phone that this will deepen Nigeria’s debt capital market, create a balance between the Federal Government local savings bond and the Diaspora Bond.

Analysts at Cowry Asset Management anticipate stability in bond prices in the OTC market, on the back of an expected boost in financial systems liquidity.

Last week, FGN bonds traded at the OTC segment moved in mixed directions: The 20-year, 10.00 percent FGN JULY 2030 debt and the 10-year 16.39 percent FGN JAN 2022 bond shed N0.06 and N0.03 respectively; their corresponding yields rose to 16.09 percent (from 16.07%) and 16.19 percents respectively. However, the 7-year 16.00 percent FGN JUN 2019 debt gained N0.05 and N0.06 respectively; their corresponding yields fell to 16.43 percent (from 16.45%) and 16.43 percent respectively. Elsewhere, FGN Eurobonds traded on the London Stock Exchange depreciated in value across most of the maturities, amid profit taking. The 5-year, 5.13 percent JUL 12, 2018 bond and the 10-year, 6.38 percentJULy 12, 2023 bond appreciated by USD0.03 (yield rose to 3.42%) and USD0.02 (yield rose to 5.54%) respectively.

However, the ERGP, which is a four-year (2017-2020) medium-term development plan of the country, has been reviewed and adjudged adequate for its purpose by many local and international development experts and organisations, including the World Bank Group and IMF.

 

HOPE MOSES-ASHIKE