Retails Investors Key Target in Nigeria’s $500m US dollar Bond Offer
The Nigerian government targets retail investor subscriptions in its $500 million domestic US dollar bond offering, the Debt Management Office (DMO) said in a note. The sum offered to the investors is part of a $2 billion domestic US dollar issuance program, the Nigerian debt agency said in an explanatory note.
The move reverses the initial plan to issue Eurobonds as part of efforts to close the gap in the government spending plan for 2024. Details showed that the proceeds from the domestic US dollar bonds would be used to fund critical sectors in the Nigerian economy.
The offering is currently available for subscriptions by locals, Nigerians in diaspora, including foreign and institutional investors, according to DMO. The 5-year US dollar-denominated local bonds priced at a 9.75% coupon rate will pay investors’ interest on capital twice in 12 months, according to the offer documents reviewed by MarketForces Africa.
The agency explained that the lot size differentiates the domestic US dollar bond from the Eurobond. According to the explanation of the agency, Eurobonds are typically issued at a large lot size of $200,000, whereas domestic US dollar bonds have a lot size of $10,000, which makes them more accessible for retail investors.
The agency explained further that Eurobonds are listed on Euroclear, but domestic US dollar bonds are listed on the Nigerian Exchange and the FMDQ platform. The bonds attract a 9.75% coupon rate, according to an offer document that states that both the interest rate and principal payment will be made in US dollars.
Analysts, and investment experts told MarketForces Africa that banks will key into the opportunity amidst issues around the windfall tax on FX gains. According to the DMO, the Central Bank of Nigeria has granted liquid asset status to the bond, making it eligible for inclusion in the liquidity ratio calculation of deposit money banks.
Analysts said the issuance is better for the country than a visit to Eurobond market at the time rates are relatively high. US Federal Reserves has refused to cut fed fund rates despite slowdown in consumer price index. #Retails Investors Key Target in Nigeria’s $500m US dollar Bond Offer
