Return to the Eurobond Market in Good Time


Tuesday, February 20, 2018 11:07 AM / FBNQuest Research 

The FGN has returned to the Eurobond market for the second time since February 2017, and attracted what the DMO terms a “peak order book” of more than US$11.5bn. In another successful issue, it has priced its offering of US$2.5bn, divided equally between 12- and 20-year debt instruments, at rates of 7.143% and 7.696% respectively.

The FGN, like its Egyptian counterpart, moved quickly last week to tap the market in case sentiment moves against EM issuers as a result of the current normalisation of US monetary policy. 

Nigeria’s borrowings on international capital markets at end-September amounted to US$3.3bn, equivalent to 21.5% of the FGN’s external debt stock. That ratio now stands close to 50%. The balance consists of bilateral and multilateral loans, the largest creditor being the World Bank Group.  

The borrowing costs are still much lower than on naira issuance. We earlier estimated the average interest rate on the FGN’s domestic debt in 2017 at 15.5%. That average has since fallen by about 200bps.

The latest issue will be utilized to refinance domestic debt, suggesting further yield compression on FGN naira paper.

The DMO’s medium-term strategy has a 60/40 target for the domestic/external blend of FGN debt plus states’ domestic borrowings. The actual split in September (before the two latest Eurobond issues) was 77/23.

Proshare Nigeria Pvt. Ltd.

Moody’s and S&P have the sovereign on the same rating for its long-term, foreign currency obligations. Fitch has Nigeria one notch higher at B+, albeit with a negative outlook.

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