Nigeria Consolidates $500m Eurobond with $1bn Issue

Nigeria disclosed on Wednesday that its $500 million notes under the $1.5 billion Global Medium Term Note programme will be consolidated to form a single series with the existing $1 billion notes, which the country issued in February and will mature by 2032.

The federal government therefore announced that it has priced its offering of the $500 million aggregate principal amount of notes at a yield of 7.5 per cent under the $1.5 billion (increased from US$1 billion) Global Medium Term Note Programme.

This, according to a statement by the Ministry of Finance, will be consolidated and form a single series with the existing $1 billion 7.875 per cent notes due in 2032.

The N1 billion notes (Original Notes) were issued on February 16. The terms and conditions of the $500 million notes, said the statement, will be identical to those of the Original Notes, paying a coupon of 7.875 per cent per annum and maturing on February 16, 2032.

They will be repayable by way of bullet repayment of the principal together with the Original Notes, the statement added.
“As with the Original Notes, the government intends to use the proceeds of the ($500 million) notes to fund capital expenditures in the 2016 budget.

“The successful pricing, which is priced 37.5bps inside the original coupon rate, demonstrates continued strong market appetite for Nigerian securities.

“This is despite continued volatility in emerging and frontier markets and shows confidence by the international investment community in Nigeria’s economic reform agenda,” the statement issued by the Director, Information, Ministry of Finance, Mr. Salisu Na’Inna Dambatta, said.

When issued, the notes will be admitted alongside the Original Notes to the official list of the UK Listing Authority and will trade on the London Stock Exchange’s regulated market.

Nigeria may apply for the notes to be eligible for trading or listed on the Nigerian Stock Exchange and Financial Markets Dealers Quotations Over-the-Counter Securities Exchange.

Pricing of the notes, the statement added, comes shortly after the country unveiled its National Economic Recovery and Growth Plan (NERGP) 2017-2020 on March 7.

The plan focuses on policy objectives in five core areas: macroeconomic policy, economic diversification and growth drivers, competitiveness, social inclusion and jobs, and governance and other enablers.

Key targets under the NERGP include reaching single-digit inflation, further growth in the agricultural sector, reducing unemployment, increasing operational energy capacity and domestic refining capacity, improving transportation infrastructure, and stabilising the exchange rate, with an emphasis on implementation, monitoring and evaluation of these economic goals.

Commenting after the successful pricing, the Minister of Finance, Mrs. Kemi Adeosun, said: “The proceeds from this additional note issuance will go towards funding capital projects in the 2016 budget.

“Infrastructure spending is at the heart of our National Economic Recovery and Growth Plan, which was released earlier this month and guides how we will deliver the urgent reform our economy needs between now and 2020.
“Resetting the Nigerian economy is essential in order for us to deliver sustainable long term growth.”

The Director General, Debt Management Office (DMO), Dr. Abraham Nwankwo, said: “Following the success of our $1 billion note issuance in February, Nigeria is delighted to have increased our 2017 Eurobond programme to $1.5 billion and to have secured the additional $500 million.

“Nigeria was keen to take advantage of favourable market conditions and investors’ appetite for Nigerian debt to complete our foreign borrowing programme for the 2016 budget and deliver further funds for vital capital projects.”
Citi and Standard Chartered acted as Joint Lead Managers and Stanbic IBTC as Financial Advisers on this issue.

Also, the finance ministry announced that the Central Bank of Nigeria (CBN) has approved a licence for a wholesale Development Finance Institution (DFI) with national authorisation to the Development Bank of Nigeria (DBN) Plc.
Adeosun confirmed the issuance of the licence, a statement from the ministry said on Wednesday.

According to the statement, the approval was conveyed in a letter addressed to the Managing Director/Chief Executive of Officer of DBN dated March 28, 2017.

The letter was signed by the Deputy Governor of the CBN in charge of Financial System Stability.
The approval was subject to meeting the minimum capital requirement of N100 billion, the reconstitution of the board of the bank and a review of its organogram.

The DBN was conceived in 2014, however its take off has been fraught with delays.
The Muhammadu Buhari administration inherited the project, but was determined to resolve all outstanding issues and set a target of 2017 for its take-off.

The finance minister had said previously that the DBN would have access to $1.3 billion which will be jointly provided by the World Bank (WB), KfW (German Development Bank), the African Development Bank (AfDB) and the Agence Française de Development (French Development Agency).

The bank is also expected to finalise agreements with the European Investment Bank (EIB).
She also stated that the DBN would provide loans to all sectors of the economy including manufacturing, services and other industries not currently served by existing development banks, thereby filling an important gap in the provision of finance to micro, small and medium enterprises (MSMEs).

As a wholesale bank, the DBN will lend wholesale to microfinance banks, which will on-lend to medium to long-term loans to MSMEs.

MSMEs contribute about 48.47 per cent to Nigeria’s Gross Domestic Products (GDP), but have access to only about 5 per cent of lending from Deposit Money Banks (DMBs).

The federal government expects that the influx of additional capital from the DBN will lower borrowing rates while the longer tenure of the loans will provide the required flexibility in the management of cash flows, giving businesses the opportunity to make capital improvements and acquire equipment and supplies.

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