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