Foreign Investors scrambled for Nigeria’s $2.5 billion Eurobonds

In a bid to replace its naira debt and reduce funding cost, Nigeria sold $2.5 billion of Eurobonds on Thurday, as the offering had attracted significant interest from leading global institutional investors.

According to a statement obtained from the website of Debt Management Office (DMO) in Abuja, the bonds “issued $1.25 billion of 12-year securities with a yield of 7.14 percent and a separate 20-year tranche, also $1.25 billion, at 7.7 percent’.

Following Africa’s biggest economy’s plunge into recession in the first quarter of 2016, Nigeria plans to use the extra funds to improve infrastructure and help revive the country’s economy that finally came out from the recession in the second quarter of 2017, with a 0.55% GDP growth.

The Eurobonds sales is the final phase of government initiated Global Medium Term Note program, that sought to reduce the burden of double-digit yields on local-currency bonds by increasing its foreign debt.

Speaking on the issuance, Christopher Dielmann, senior economist at Exotix Capital, in a note to clients Thursday as quoted by the Guardian, said “Using the new external issuances to reduce domestic financing will certainly lead to lower borrowing costs, as we have already started to see,” adding that “It will also help reduce roll-over risk associated with shorter-tenured domestic issuance and provide a much-needed degree of fiscal space.”

Demand for Nigeria’s bonds has been impressive, as the country’s Finance Ministry in a tweet noted that as at Friday, investors had placed more than $11.5 billion of orders.

Reacting to the successful Commenting pricing of the bonds, Nigeria’s Finance Minister, Kemi Adeosun said “Nigeria is focused on reducing the cost of our debt portfolio and ensuring we have the optimal mix between domestic and international debt.”

Supplementing the issuances completed in 2017, proceeds of the issuance would be used to refinance domestic debt, which according to the statement released “is high cost and short term, with lower-cost international debt, with a longer tenure.”

In 2017, the West African country sold a total of $4.8 billion Eurobonds, following its issuance of $3 billion of 10- and 30-year debt.

Offering is expected to close on or about February 23, subject to the satisfaction of various customary closing conditions.