FG Makes Move to Stabilise Naira, Announces Sale of $500 Million Dollar Bond

• Nigeria’s Finance Minister Wale Edun launched a $500 million dollar-denominated bond sale on the local market
• The ministry said in a statement that the move was part of plans to stabilise the naira currency
• It also aimed to attract international investors who back reforms initiated by President Bola Tinubu

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

In an effort to address its budget deficit and support the weak naira, Nigeria, which had planned to issue a Eurobond this year, has opted to postpone the issue and instead sell its first dollar bond on the local market.

Finance Minister Wale Edun announced on Thursday at an investor conference in Lagos, the country's commercial hub, that the $500 million, five-year bond will be issued on August 19.

He stated in a Bloomberg report that the government will instead focus on Nigerians living in the country as well as the sizeable portion that resides outside as the market conditions had not been favorable to move forward with the Eurobond.

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“Interest rates are coming down but they are still elevated and our access to those markets are very strongly affected by the way the rating agencies rate developing countries. The only answer to that is to rely on your own recourses to raise funds domestically.”

After global interest rates spiked substantially in 2022 in reaction to rising inflation, several African countries were priced out of international finance markets. However, some of these countries, notably Ivory Coast, Benin, Senegal, Kenya, and Cameroon, have made a comeback this year.

The lead arranger United Capital Plc's managing director for investment banking, Gbadebo Adenrele, stated that the yield on Nigeria's issue will be comparable to that of its 2029 Eurobonds. In London, the 2029s were quoted at 10.23% at 3:25 p.m.

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The most populated country in Africa is facing a large income shortage due to limited tax base and insufficient oil output.

With a 9.8 trillion naira deficit, the government approved a 28.8 trillion naira ($18.1 billion) spending plan for 2024, which it intends to finance by borrowing from both local and foreign sources.

There's been pressure on the naira too. When President Bola Tinubu loosened currency regulations and let it to float last year, it was purposefully depreciated against the dollar. As a result of dollar scarcity in the local foreign exchange market, it is still under pressure.

Edun stated that although Nigeria has not given up on the Eurobond market, it will wait for more enticing circumstances.

“We have access to it and we will access that market as need be. By the time we have got all we can from our own people, our own citizens on fair and competitive terms, then we can look to outsiders.”

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FG invites Nigerians to invest in savings bonds

Legit.ng reported that the Debt Management Office (DMO) has unveiled a new opportunity for subscription to two Federal Government of Nigeria (FGN) savings bonds, priced at N1,000 per unit.

The DMO disclosed this in a statement released on Monday, August 7, 2024, in Abuja.

These savings bonds are designed specifically for retail investors, ensuring a quarterly interest payout and full repayment of the principal upon maturity.

Source: Legit.ng