Return To The Eurobond Market In Good Time

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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.

 

Sources: Debt Management Office (DMO); FBNQuest Capital Research
  • 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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