Nigeria’s $1bn Eurobond over-subscribed amid investors’ worries

Despite claims by Nigerian officials that the country’s $1bn Eurobond sale was oversubscribed, investors are still insisting that permanent peace be found in the oil producing Niger Delta region as a precondition for full payment of their slots.

Some of them also stated that Nigeria should put a policy in place that will stabilise the exchange rate of the naira.

This is coming on the heels of news that the bond has been oversubscribed by potential investors, who have expressed interests, although the country is yet to reap the funds from the sales.

Experts say that in most bonds of such magnitude, application for the instrument is one thing while fully backing it up is a different thing.

Nigeria’s Minister of Finance, Kemi Adeosun had said in a statement on Friday, that the country’s $1 billion Eurobond offered in the international market has been oversubscribed at an interest rate of 7.875%.

According to her, the Notes were approximately eight times oversubscribed with orders in excess of US$7.8 billion compared to a pre-issuance target of US$ 1.0 billion, which demonstrates a strong market appetite for Nigeria.

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“This is despite continued volatility in emerging and frontier markets and shows confidence by the international investment community in Nigeria’s economic reform agenda”, the statement noted.

However, some of the potential investors in the bond are demanding for more than eight per cent yield with a demand for a commitment by Nigeria that it would not slip back to the era of lower volume of crude oil output, as was reflected by the crisis in the Niger Delta oil producing region.

The sale of the bond took off on Tuesday across Europe and America as promised by officials earlier in January 2017. And the bond will mature on 16th February 2032 with a bullet repayment of the principal.

The issues raised by investors, are seen by top government officials as a set of fresh hurdles, which is giving them sleepless nights, according to analyst.

But a spokesman of DMO, Malami Danladi said there is no going back on the success anticipated at the sale because there had already been an indication that 80 per cent requests had been recorded, going by the return of interest request (RIR), as captured in the data of DMO from Wednesday.

On the discount rate of demand of above eight per cent against the proposed five to six per cent, he said: “Like every other instruments, bonds are traded based on negotiation, and that is going on in the sale of the $1 billion Eurobond.”

Sources say both Adeosun, and Central Bank of Nigeria Governor, Godwin Emefiele, as leaders of government delegations for the marketing programme, were having a tough time assuring investors that peace talks with the militants in the Niger Delta and the insurgency in the north east of Nigeria were already achieving results.

In the United States, Emefiele, who is in charge of the bond marketing in that country, reportedly told inquisitive investors that he was personally involved in the peace move initiated by the Federal Government in the Niger Delta region.

Addressing a conference, organised by Cities Group, one of the investment banks appointed as managers of the bond proceeds, Emefiele was quoted by a foreign news cable as saying: “the exit from recession by Nigeria is feasible this year (2017).”

On their concerns over the Naira exchange rate, which has remained unstable, the CBN Governor told his audience that the causes of the perceived distortion had been identified with a policy directive for the factors being addressed.

But the central bank boss was said to have lacked answers to a barrage of questions on whether President Muhammadu Buhari, who’s argued against a devaluation of the naira had changed his mind on the issue.

Adeosun, on her part assured the would-be investors that the bond, with a 15-year maturity, is worth their commitments as Nigeria is in its best state of economic recovery in the next few months.

She also told her audience that the local currency is suffering from the downturn to the economy, caused by a sharp fall in price of crude oil in the international market, but added that OPEC had recently addressed the issue.

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