Nigeria raises over $900m in first domestic dollar bond

…Records 180% subscription rate

…FG ready to leverage capital markets for growth -DMO

Nigeria’s efforts to deepen its capital market and diversify funding sources took a significant leap with the successful issuance of the inaugural Domestic Federal Government of Nigeria (FGN) US Dollar Bond.

In what is considered a landmark transaction, the Federal Government raised over $900 million from investors.

The bond, which was over 180 percent subscribed, marks a crucial step in broadening Nigeria’s funding avenues amid global economic headwinds. It reflects growing investor confidence in the nation’s economic outlook.

The Debt Management Office (DMO), which handled the issuance on behalf of the Federal Government, announced that the bond had been priced at par with a semi-annual coupon rate of 9.75 percent and a five-year tenor.

Read also: What government’s domestic dollar bond means for banks recapitalisation

This issuance is the first under the Domestic FGN US Dollar Bond Programme, established pursuant to the 2023 Presidential Executive Order No. 16 (Foreign Currency Denominated Financial Instrument Local Issuance Programme and Related Matters Order).

According to officials, proceeds from the bond will be deployed to critical sectors of the economy, subject to legislative approval, as part of ongoing efforts to sustain growth and address key infrastructure gaps.

Investors participating in the bond cut across a broad spectrum, including Nigerian residents, non-residents, Nigerians in the diaspora, and qualified institutional investors, underscoring the broad-based appeal of the instrument.

The bond will be listed on the Nigerian Exchange Limited (NGX) and FMDQ Securities Exchange Limited, increasing its accessibility and tradability within the domestic financial ecosystem.

Economic Diversification and Investor Confidence

Wale Edun, minister of finance and coordinating minister of the economy, hailed the success of the issuance, noting that it signals robust investor sentiments towards Nigeria’s economic trajectory.

Edun reaffirmed the administration’s focus on economic reforms, describing the bond as a testament to the Federal Government’s resolve to explore innovative funding solutions while promoting financial inclusion.

“The 180 percent subscription and the broad participation in the bond reflect confidence in our economy,” Edun said.

“Better days lie ahead for the Nigerian economy as we diversify our funding sources and continue to deepen our capital markets.”

The bond issuance also aligns with President Bola Ahmed Tinubu’s broader economic agenda of improving fiscal stability, strengthening foreign reserves, and creating a conducive environment for local and foreign investments.

Read also: $500m domestic dollar bond result expected Friday

DMO’s Strategic Role

Patience Oniha, DMO director-general, emphasised the strategic importance of the bond, crediting the transaction’s success to the expertise of the advisory team.

She commended all parties, including Africa Finance Corporation as global coordinator, United Capital Plc as lead issuing house/coordinator, as well as Meristem Capital Limited, Stanbic IBTC Capital Limited, and Vetiva Advisory Services Limited as issuing houses.

She also commended the legal partners, Olaniwun Ajayi LP and G. Elias, and financial advisers, Constant Capital Markets and Securities Limited and Iron Global Markets Limited, for their critical roles in structuring and executing the bond.

Oniha noted that the issuance is a demonstration of Nigeria’s ongoing commitment to leveraging its capital markets for economic growth.

“This transaction exemplifies the type of innovative thinking required to meet Nigeria’s funding needs. It also reinforces our commitment to creating a vibrant and resilient financial market that can attract diverse investors,” she said.

Further expressing her satisfaction and sense of achievement with the exercise, Oniha added that the DMO was very pleased with the remarkable outcome of the bond. She explained that the subscription of over $900 million when compared to the $500 million that was offered, as well as the diverse investors who subscribed to the bond, attests to the depth and increasing sophistication of the domestic fixed income securities market.

Read also: Nigeria’s domestic dollar bond steals Eurobond shine

Looking forward, she said the DMO will play a pivotal role in coordinating future tranches of the Domestic FGN US Dollar Bond Programme, which could further diversify Nigeria’s capital raising options and attract more foreign currency inflows into the domestic market.

The success of the over $900 million bond issuance signals optimism for further capital market developments. With the right policy mix and investor confidence, Nigeria could unlock more innovative financing solutions, boosting its fiscal space and solidifying its place as a key player in the African capital markets landscape.