The Debt Management Office (DMO) has announced that the federal government plans to issue a fresh Eurobond to raise $6.2 billion (N2.6 trillion) for the financing of the 2021 budget.
Countries use this Eurobond, a foreign currency denominated debt instrument, to borrow money from the international market.
The DMO had announced in April that plans were ongoing towards the issuance of Eurobonds and its plans to appoint transaction advisers through an open bid process.
Also, it announced in August that the Federal Executive Council (FEC) had approved eight transaction institutions to advise the country on its Eurobonds issuance in its bid to finance the 2021 budget deficit.
According to the DMO, JP Morgan, Citigroup, Standard Chartered Bank and Goldman Sachs were approved as international bookrunners/joint lead managers.
Chapel Hill Denham was appointed as the Nigerian bookrunner; FSDH Merchant Bank as the financial adviser; White & Case LLP and Banwo & Ighodalo as the international and Nigerian legal advisers respectively.
In a statement Thursday, the DMO said; “Virtual meetings with investors have been scheduled for September 17 and September 20, 2021. In order to avail local investors the opportunity to invest in the Eurobonds, meetings will also be held with local investors.”
The statement noted that this is the first time local investors will be included in the road shows, and that it is one of the reasons why a Nigerian Bookrunner (Chapel Hill Denham Advisory Services Ltd) was appointed as one of the Transaction Advisers.
Key expectations & benefits
Through the Eurobond issuance, the DMO statement noted that Nigeria is expected to raise up to $3 billion (1.2 trillion) but no more than $6.2 billion.
“The issuance for which all statutory approvals have been received, is for the purpose of implementing the New External Borrowing in the 2021 Appropriation Act. Proceeds are for the financing of various projects in the Act,” the statement reads.
It said 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.
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The DMO highlighted some of these benefits to include: “It is an inflow of foreign exchange, leading to an increase in External Reserves. External Reserves help support the Naira Exchange Rate, and Nigeria’s sovereign rating.”
Also, the debt office noted that when Nigeria raises funds externally, through Eurobonds, it frees up space in the domestic market for private sector and sub-national borrowers which in turn helps the government 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 doing so, 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 statement reads.
According to the statement, the local listing of Nigeria’s Eurobonds on the Nigerian Exchange Ltd. and the FMDQ Securities Exchange Ltd., have increased the range of products on these two exchanges and their respective market capitalization.
“Overall, Eurobond issuances by Nigeria and the investor meetings that precede the pricing, have provided a strong global platform for Nigeria to tell its own story and opportunities available in Nigeria for investors,” it added.