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Naira strengthens after Nigeria issues Eurobond

Naira, Nigeria’s legally approved means of exchange on Wednesday recorded marginal appreciation at the official window, a day after the country issued $4 billion Eurobond.

Liquidity in the market rose by 14.49 percent as the daily foreign exchange market turnover printed at $229.72 million on Wednesday from $200.65 million recorded on Tuesday.

Consequently, after trading on Wednesday the dollar was quoted at N413.18 as against N413.28 quoted on Tuesday, representing 0.02 percent gain, data from the FMDQ indicated.

Currency traders who participated at the trading session on Wednesday maintained bids at between N409.00k and N415.00k per dollar.

Naira had in the last 10 days lost 0.37 percent (N1.51) to the dollar to close at N413.18 on Wednesday from N413.18 on September 9, 2021 due to increased demand amid dollar shortage.

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The Debt Management Office (DMO) announced on Tuesday that Nigeria had raised the sum of $4 billion through Eurobonds which were issued in three tranches: 7-years $1.25 billion at 6.125 percent p.a., 12-years $1.5 billion at 7.375 percent per annum., and 30-years $1.25 billion at 8.25 percent p.a.

According to the DMO the Order Book peaked at $12.2 billion which enabled the FGN to raise $1 billion more than the $3 billion it initially announced. The long tenors of the Eurobonds and the spread across different maturities are well aligned with Nigeria’s Debt Management Strategy, 2020 – 2023.

Since the Eurobonds were issued as part of the New External Borrowing in the 2021 Appropriation Act, the raising of USD4 billion through Eurobonds provides a significant amount of funds to finance projects in the Act, thus contributing to the implementation of the 2021 Appropriation Act, the DMO said.

The DMO on Wednesday the DMO conducted its scheduled FGN bond auction to reopen the 10-year, 20-year, and 30-year instruments. A total of N150 billion was offered across 10-year (N50 billion), 20-year (N50 billion), and 30-year (N50 billion) tenors.

A report by the FSDH noted that FGN bonds secondary market closed on a mildly positive note on Wednesday, as the average bond yield across the curve cleared lower by 2 bps to close at 8.54 percent from 8.56 percent on the previous day. Average yields across medium tenor and long tenor of the curve compressed by 13 bps and 3 bps, respectively. However, the average yield across the short tenor of the curve closed flat.

The Nigerian treasury bills secondary market closed on a flat note, with the average yield across the curve remaining unchanged at 5.52 percent on Wednesday, the report stated. Average yields across short-term, medium-term, and long-term maturities closed flat at 3.90 percent, 4.91 percent and 6.59 percent, respectively.

The Overnight (O/N) rate increased by 1.75 percent to close at 18.00 percent as against the last close of 16.25 percent, and the Open Buy Back (OBB) rate increased by 1.50 percent to close at 17.00 percent compared to 15.50 percent on the previous day.

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