Four Nigerian Banks Raise U.S. $1.45bn From Eurobond Market

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Following the creation of a sovereign benchmark in the international capital market (ICM) by the federal government, four Nigerian banks had taken advantage of the opportunity by issuing Eurobonds valued at a total of $1.45 billion between January 2011 and July 2013. The banks were First Bank of Nigeria Limited which issued $300 million Eurobond in July 2013, Fidelity Bank Plc's $300 million Eurobond sold in May 2013, Access Bank Plc's $350 million Eurobond issued in July 2012 and Guaranty Trust Bank's $500 million Eurobond which was issued in May 2011.

 

To this end, the Debt Management Office (DMO) has urged more Nigerian corporates to leverage the existing sovereign benchmark to raise long-term capital in both the domestic and the ICM. The Director General, DMO, Dr. Abraham Nwankwo, made this call in a speech presented at a one-day retreat for journalists tagged: "Opportunities for the Private Sector from Public Debt Management Achievements," organised by the debt office in Lagos at the weekend. Nwankwo noted by successfully addressing some of the challenges and constraints that affected Nigeria's public debt management, the DMO anticipated windows of opportunities for the private sector to raise long-term capital for the development of the real sector and infrastructure. 

Furthermore, he argued the outcome of the $1 billion bond issued by the federal government recently, which was oversubscribed, showed that there was an effective demand for debt instruments from the country. "The challenge is for Nigeria's private sector, either as individual private companies, or alternatively by pooling their resources together to directly access the international market, to raise long-term, lump sum monies to for various projects in the Nigerian economy. It can be in agriculture, solid minerals, transportation, roads, power projects, manufacturing amongst others. There is nothing holding other private sector firms either as individuals or by pooling their balance sheet together from accessing the ICM," he said.

 

The DMO boss declared that the debt office would continue to deepen the bond market by enhancing liquidity as well as the introduction of other instruments. "Even if government is not undertaking new borrowing, the DMO will continue to issue bonds because you still need to refinance the existing debt stock. So, to say that we will continue to be active does not necessarily mean that we will continue to be borrowing money. We are proactively managing existing debt stocks.

"Government is insistent in making sure that public borrowings are reduced to the barest minimum, to ensure that government does not crowd out the private sector and to make sure that cost of borrowing is reduced," he said. He also disclosed that in the domestic market, about 20 Nigerian companies had issued long-term instruments that enabled them raise about N200 billion between 2005 and 2012 from the market, to fund various real sector projects. Nwankwo added: "Our yield curve domestically has been elongated to 20 years, so private companies that are in need for 5-year money, there is a market for it, those that need 10-year fund, there is a market and those that need 20-year fund, possibly for solid minerals and infrastructure, there is also a market where they can raise money."So the days are gone when Nigerian private sector complains that one of their major constraints was lack of long-term capital in the market or that their banks will lend them money only for a maximum of 12 months. So if there is any complain the private sector has, it should not be that there is no market where they can raise long-term funds. The fact that the International Finance Corporation issued its own bond in the local, a naira-denominated, also shows that the market for long-term fund exists in Nigeria."

 

 

Source: All Africa