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Nigeria’s $1bn Eurobond to debut third quarter – DMO

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 Nigeria’s $1billion Eurobond being planned to raise funds from the international capital market to finance gas-to-power infrastructure will debut before end of September 2013, Abraham Nwankwo, Director-General, Debt Management Office (DMO) has confirmed to BusinessDay.

In an exclusive interview with a BusinessDay team in Abuja, Nwankwo also informed that the Diaspora bond that would enable the Federal Government pull funds from Nigerians living abroad for developmental projects back home, would hopefully come on stream by December.

The plan, he said, is that by these respective dates, all preparations and processes, including the main bond issue would have been concluded with the needed funds raised from the international capital market.

The essence of the $1billion Eurobond is to create more windows of opportunity for the country’s private sector players to access foreign funds at low cost, while the $100 million which is Nigeria’s first ever Diaspora bond is to afford citizens living abroad the privilege of investing in their own country and contribute to the nation’s development.

Both bonds are captured in the Federal government’s $8 billion medium term external borrowing plan which is already approved by the National Assembly and Federal Executive Council (FEC).

Nwankwo announced plans by the DMO to introduce sophistication in the Nigeria’s bond trading procedure, for instance securities lending which is literally loaning a stock, derivative, other security to an investor or firm.

He also said his office would move to introduce inflation linked bonds, which is a situation where the principal is indexed to inflation, as the bonds are thus designed to cut out the inflation risk of an investment.

On the bond issue, Nwankwo predicted that there was the likelihood that government would get the bonds floated at very reasonable rates on the strength of appreciable gains of the $500 million earlier issued in the international capital market which is currently trading at a very low yield of just over four percent.

Again, he said that they would use the $1 billion Eurobond issue to try to launch Nigeria into a longer-term maturity period of over ten years, adding that his office has already commenced all the necessary processes for implementation, including appropriate documentation, particularly the prospectus, which will capture details of the Nigerian reality, in terms of its economic and political status.

The documentation will give the true picture of the Nigerian situation, the potential, what the agenda is going forward, in order to encourage investors to subscribe to the Eurobond offer.

Already, Vice President Namadi Sambo, who is also the chairman of DMO’s supervisory board, has directed the relevant Ministries, Departments and Agencies (MDAs), including the Ministry of Petroleum Resources, the Ministry of Power, Ministry of Finance, the DMO to work collectively and package these necessary project documents.

“We assure Nigerians that latest by the end of September, we would have succeeded in raising this money,” he pledged.

He assured that the emphasis of government now is that the proceeds be tied to specific projects, “so that upfront, Nigerians know which projects we are pursuing, the dimensions, details of the projects, so that the monitoring, tracking and implementation would be one that every Nigerian would be committed to and ensure that we deliver appropriately.

“The $500 million debut offer we made was ten years, but we will try as much as possible to push the frontiers to see whether we can even go beyond ten years, to reflect the strength and confidence of the Nigerian economy with this bond issue,” he told the team.

Nigeria made its first presence at the international market with a ten-year $500 million Eurobond offer at 6.75 percent coupon. That bond was specifically issued to consolidate Nigeria’s position in the international capital market has been trading at a low yield of about 4.5 percent, signifying investor confidence in the nation’s economy.

Nwankwo added that the private sector can now key into this, by taking advantage of the country’s sovereign benchmark bond in the international market because of the low yield and low cost of funding made possible by the Nigerian sovereign bond at the international capital market, which is considered to be attracting low yields.

One of the five-year strategic plans of the Debt Office, according to Nwankwo is to continue to strategically limit government borrowing and create more space for private sector participation as the market continues to be developed.

“We would encourage the private sector to issue more bonds to raise money so that they can invest in agriculture, railway, power, and all that. We will do everything possible to encourage them in this regard, raise money and develop the real sector of the economy.