The Federal Government of Nigeria on Monday offered for subscription by book build a Sovereign Green Bond worth N15 billion at a higher interest rate to finance some projects in renewable energy, afforestation, and transportation in the country.
Green Bonds, also known as Climate Bonds, are fixed income securities issued to finance projects that have a positive impact on the environment and provide solution to climate change, while book building is a method of offering securities to the public in a way to allow investors bid at various prices or rates within a band specified by the issuer.
The debt instrument is the second issuance (Series II) undertaken by the Debt Management Office (DMO) on behalf of the Federal Government of Nigeria (FGN) after a successful debut Green Bond issuance of N10.69 billion in December 2017 which was well received by a wide range of investors.
The Series II Green Bond, which is expected to mature in 2026, was issued at a coupon band of 14.40 percent to 14.50 percent per annum compared with the previous Green Bond offered at a coupon of 13.48 percent. The coupon band implies the range at which investors could bid for the instrument.
The issuance of the seven-year tenor bond “is a further demonstration of the FGN’s commitment to the reduction of greenhouse gas emissions by 20 percent (unconditionally) by 2030, as outlined under the Paris Agreement signed on September 21, 2016”, the DMO said in a statement.
As part of the book building process, the debt office said it would work with Chapel Hill Denham Advisory Limited, Capital Assets Limited, Rand Merchant Bank Nigeria Limited, and Stanbic IBTC Capital Limited as issuing houses to the offer.
Consequently, the DMO stated that it started receiving applications for the offer through the issuing houses on Monday, June 3, 2019. The subscription window for the Green Bond is expected to close on Monday, June 10, 2019, while settlement would be made on June 13, 2019, or two days after the transaction date.
The DMO assured that the bond is backed by the full faith and credit of the Federal Government of Nigeria, adding that proceeds from the offer would be solely used for “Green Projects as identified by Inter-Ministerial Committee on Climate Change, approved in the 2018 Appropriation Act, and assessed by Moody’s Investors Service”.
According to the Debt Management Office, Moody’s Investors Service assigned a GB1 (Excellent) Green Bond Assessment to the offer.
The bond security was offered at N1,000 per unit subject to a minimum subscription of N10 million and in multiples of N1 million thereafter. The debt office guaranteed investors of half-yearly coupon payments and a bullet repayment of the principal on the maturity date.
Furthermore, the FGN Series II Green Bond would be listed on the Nigerian Stock Exchange and the FMDQ OTC Securities Exchange to enable bondholders to trade their investments on the secondary markets.
OLUWASEGUN OLAKOYENIKAN
