IFC, AfDB plan $2.5b Naira bonds
The International Finance Corporation (IFC) and African Development Bank (AfDB) have started arrangements to issue Naira-denominated bonds worth $2.5 billion, about N400 billion, in landmark bond issues that will further redefine the Nigerian domestic debt market.
Securities and Exchange Commission (SEC) Sunday confirmed the bond issuance plans by the two multilateral financial institutions. The Debt Management Office (DMO) also confirmed plans by the Federal Government to raise funds from remittances of Nigerians in Diaspora and other investors through the issuance of Diaspora bond and Global Depository Notes (GDN) bond.
Director General, Securities and Exchange Commission (SEC), Ms Arunma Oteh, who spoke at a two-day training workshop organized by the Capital Market Correspondents Association of Nigeria (CAMCAN) in Badagry, Lagos State, said both the IFC and AfDB were interested in raising medium term note (MTN) bonds.
According to her, IFC has already approached the apex capital market regulator for a medium term note (MTN) programme for a naira-denominated bond worth about $1 billion while the AfDB has also filed for similar instrument of about $1.5 billion.
Oteh, whose address was presented by her communication adviser, Mr. Obi Adindu, said the new issues by the multilateral bodies will not have any lifespan of a shelf programme, indicating that they can continuously raise the funds as long as they want.
She noted that allowing shelf registration for bonds is an important step in spurring activity from issuers pointing out that the Commission had started with an initial lifespan of two years for shelf programmes but recently the board of the SEC did away with the time limitation implying that shelf programme can now enjoy an unlimited lifespan.
'The Nigerian bond market is certainly on the verge of a revolution buoyed an improved, competitive and conducive environment that attracts issuers and investors alike. The yield curve of the FGN bonds which has been extended to 20 years provides a good benchmark for issuers of all stripes to leverage the bond market to attract capital, both foreign and local. The market will continue to attract significant amounts of capital internationally since the FGN bond attracted inclusion into the emerging markets indices of Barclays and JP Morgan,' Oteh said.
She outlined that since 2010, State Governments have issued bonds worth over N421 billion and the amount of corporate bonds raised from 2010 to date is more than two and half times all the bonds issued by corporations from 1960 to 2009 in nominal terms.
The DMO also confirmed the plan by the Federal Government to raise new funds from the international market through the issuance of Diaspora Bond and FGN Bonds in Global Depository Notes (GDN).
It should be recalled that the Federal Government had in 2011 made its debut in the international capital market with $500 million 10-year 6.75 per cent Sovereign Eurobond. Nigeria returned to the international capital market in July 2013 and successfully raised $1.0 billion in two tranches.
Director General, Debt Management Office (DMO), Dr Abraham Nwankwo, said government had sourced N544.06 billion through domestic bond issues to finance about 61 per cent of 2013's fiscal deficit of N887 billion.
Nwankwo, who was represented by Head, Policy, Strategy & Risk Management, Mr Joe Ugoala, noted the gradual decline in fiscal deficit financing from N1.36 trillion in 2010 to N852 trillion in 2011 and N744.44 trillion in 2012.
He added that four banks including Guaranty Trust Bank, First Bank of Nigeria, Access Bank and Fidelity Bank have also raised $1.85 billion, about N287 billion, between January 2011 and November 2013.