… Edun hails Tinubu reforms as FG raises $900m
The naira strengthened significantly against the US Dollar on Thursday, following the successful issuance of a record-breaking domestic dollar-denominated bond.
The $500 million bond, coordinated by the Ministry of Finance, marks a pivotal moment in Nigeria’s economic development and highlights the growing confidence in the country’s capital market.
Data sourced by BusinessDay showed naira rallied 5.06 percent against the dollar on Thursday, marking its biggest gain in almost two months due to the debut domestic dollar-bond issue that had attracted strong interest from investors.
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The federal government had on Wednesday announced the raise of over $900m from its debut $500m domestic dollar-bond offer that closed last month, August 30,2024, with an interest rate of 9.75 percent per annum for 5 years.
The relatively high coupon, set at a spread of +600 basis points over US Treasuries, seems to have attracted both retail and institutional investors.
After trading, the naira appreciated by 5.06 percent as the dollar was quoted at N1,558.75 compared to N1,637.59 seen on Tuesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data from the FMDQ Securities Exchange Limited.
Infrastructure boost
In a move reminiscent of his previous background as a top investment banker, Wale Edun, minister of finance and coordinating minister of the economy, in a statement, said the bond issuance saw an impressive over 180percent subscription, highlighting the continued confidence of investors in Nigeria’s economic stability and growth prospects.
According to Edun, proceeds from the bond will be directed towards critical sectors of the economy as approved by President Bola Ahmed Tinubu.
The minister noted that the successful issuance underscores the government’s commitment to diversifying its sources of funding and bolstering economic growth despite current economic challenges.
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The funds raised from this bond issuance are set to be channelled into critical infrastructure projects and development programs that will bolster Nigeria’s economic growth.
According to Edun, the forthcoming listing of the dollar-denominated bond on the Nigerian Exchange (NGX) and FMDQ Securities Exchange will position Nigeria as a key player in deepening its capital markets and promoting financial inclusion.
He noted that the bond will provide much-needed capital for these initiatives, further cementing Nigeria’s position as a leader in financial markets innovation across the continent.
More inflows
Market sources said the success of the $500 million bond would open up a new window of capital raising for other tiers of government and companies, with the maiden sovereign bond serving as a benchmark for subsequent issuances.
Abdulrauf Bello, an investment research strategist said a 180 percent subscription suggests a solid appetite.
“I think the FG plans to raise $2bn overall. With this outing, they could get a lot more. The FX market should enjoy a small breather,” he said.
Since the liberalisation of the naira, the currency has witnessed much volatility plummeting to an all-time low of almost N2,000 to a dollar on the street while it exchanged for N1,600/$ on the official window by February ending.
This free fall of the naira resulted in Olayemi Cardoso, the CBN governor, mopping up liquidity and initiating policies to calm the FX market.
It witnessed a brief change in fortune emerging as the best-performing currency in March. The naira lost some of its gains to become the worst-performing currency in the world in April, a new Bloomberg report shows.
In June it witnessed some stability hovering between N1500 to N1600, despite being a season of high demand.
Edun said that the funds raised from this bond will be directed toward critical infrastructure projects and development programs, further strengthening key sectors of Nigeria’s economy.
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Impact on Economy
Patience Oniha, director general of Debt Management Office (DMO), said the huge success of the $500 million bond was a pivotal step in Nigeria’s economic development.
She reaffirmed the Federal Government’s commitment to collaborating with investors and stakeholders to drive economic growth and development in the country.
Oniha commended all the parties involved in the transaction, noting that its success was made possible through the advisers’ expertise and guidance.
She added: “We also appreciate the continued support of the Nigerian public and our institutional partners who contributed to the successful completion of this historic issuance.”
