Federal Government Redeems $US500 Million Eurobond
Patience Oniha -Director General, Debt Management Office

Federal Government Redeems $US500 Million Eurobond

The Federal Government of Nigeria has successfully redeemed its US$500 million, 6.75 percent -JAN-2021 Eurobond that was issued in 2011.

Analysts said the redeemed sum is expected to reduce total public exposures to foreign investors by the same amount.

Though Federal Government has also indicated planned to borrow another tranche from international market.

Reacting to this, Meristem Securities Limited said this the Eurobond redemption is a positive development which demonstrates Nigeria’s capacity to meet its obligations.

In reaction, the market went bullish on Nigeria’s outstanding Eurobonds as yields declined across tenors following this development.

Data shows that another Eurobond maturity is due in June 2022 with an outstanding value of US$300 million.

Considering the large-sized 2021 budget deficit of ₦5.60 trillion, analysts recall that the Federal Government plans to raise ₦2.50 trillion or US$6.60 billion from the international debt market this year.

“Although high debt servicing costs continue to cloud Nigeria’s credit outlook, the recent payout to Eurobond investors and the relatively improved oil revenue outlook should count towards a better credit rating and hence a lower cost of borrowing”, Meristem stated.

It added that the current yield trend in the domestic treasury fixed income market is obviously a reversal of the downtrend witnessed last year.

Nevertheless, the yield environment remains relatively depressed and is expected to remain so for at least the first half of the year.

Analysts stated that this position is further supported by the recent decision of the MPC to maintain status quo until March 2021.

“We also do not envisage any further significant increase in stop rates as system liquidity is expected to remain elevated over the near term.

“Thus, while demand at primary auctions will remain strong, driven by conservative investors such as Pension Fund Administrators, demand at the secondary market is expected to remain weak.

“We maintain our recommendation that investors should consider investment grade corporate bonds and commercial papers in their quest for above-average returns”, Meristem stated.

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Federal Government Redeems $US500 Million Eurobond