Nigeria Returns to International Capital Market for U.S.$6.2 Billion Eurobonds

17 September 2021

Abuja — Three years after it issued a debt instrument in the International Capital Market (ICM) with a $2.5 billion aggregate Eurobonds under its Global Medium Term Note Programme, Nigeria has announced plans for another visit to the global market. On offer this time is the issuance of N2.343 trillion ($6.2 billion) Eurobonds to part-finance the N5.2 trillion 2021 Budget deficit.

The Debt Management Office (DMO) disclosed yesterday that it had secured virtual meetings with investors holding from today to September 20th, 2021.

In order to avail domestic investors the opportunity to invest in the Eurobonds, the debt management agency said meetings would also be held with local investors.

A major highlight is that this is the first time local investors would be included in the road shows, a development DMO explained was one of the reasons a Nigerian Bookrunner (Chapel Hill Denham Advisory Services Ltd.) was appointed among the transaction advisers.

The DMO stated, "Through the Eurobond issuance, Nigeria is expected to raise up to $3 billion but no more than $6.2 billion.

"In addition to providing funding to part-finance the deficit in the 2021 Appropriation Act, the issuance of Eurobonds by Nigeria benefits the country in many other strategic ways."

According to the DMO, it would also bring about an inflow of foreign exchange, leading to an increase in external reserves to help support the naira exchange rate as well as Nigeria's sovereign rating.

It further explained that when Nigeria raised funds externally through Eurobonds, it freed up space in the domestic market for private sector and sub-national borrowers.

The debt management body stated, "In effect, it helps the sovereign not to crowd out other borrowers in the domestic market. The issuance of Eurobonds by Nigeria has opened up opportunities for Nigeria's corporate sector, notably banks, to issue Eurobonds to raise capital in the ICM.

"By so doing, their capital base has been strengthened to provide banking services whilst also meeting regulatory requirements"

Nigeria has a sovereign yield curve in the ICM, extending up to 30 years.

The agency observed that the local listing of Nigeria's Eurobonds on the Nigerian Exchange Limited and the FMDQ Securities Exchange Limited had increased the range of products on the two exchanges and their respective market capitalisation.

The DMO explained that overall, Eurobond issuance by Nigeria and the investor meetings that precede the pricing, had provided a strong global platform for Nigeria to tell itsown story and opportunities available in Nigeria for investors.

The federal government had on August 5 announced the appointment of eight international and domestic transaction advisers for the proposed Eurobond offer.

The transaction advisers included international bookrunners/joint lead managers-JP Morgan, Citigroup Global Markets Limited, Standard Chartered Bank, and Goldman Sachs.

The Nigerian bookrunners to the proposed issuance are Chapel Hill Denham Advisory Services Ltd and FSDH Merchant Ltd who will act as financial adviser.

White & Case LLP would act as the international Legal Adviser while the firm of Banwo & Ighodalo are the Nigerian Legal Advisers.

The DMO disclosed that the eight Transaction Advisers emerged following an open competitive bidding process as outlined in the Public Procurement Act, 2007 (as amended).

It stated that a total of 38 institutions responded to the Expression of Interest (EoI) request, adding that after rigorous evaluation to ascertain their technical capacities, eight institutions were selected.

The DMO stated that while the federal government expected a successful outing, it would be mindful of cost and risks (in terms of tenor and pricing) in determining the amount of the Eurobonds to issue.

According to the agency, since the Eurobonds are being issued to part-finance the 2021 Budget deficit, the proceeds would be used to fund various projects in the budget.

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