Nigeria has concluded arrangements for its first outing at the international bond market, after two years, with the retention of the global investment banks, including Citibank, JPMorgan Chase & Co and Goldman Sachs to guide her.
This development, according to Bloomberg and informed by sources close to the transaction, underscores Africa’s most prolific oil-producing nation’s intent to re-engage with global financial markets to support its budgetary needs for the fiscal year.
This move marks the country’s return to the international bond market after a two-year pause.
In March 2022, the country raised $1.25 billion through Eurobond issuances.
The epoch making move, according to analysts, underscores growing confidence among global financiers in recent economic reforms by the Tinubu administration.
Ratings agency, Moody’s recently gave Nigeria a CCC+ (Positive Outlook) rating, the first since 2011.
TGL Capital analyst, Issac Marshall, believes that despite macroeconomic difficulties and the naira decline, the Central Bank of Nigeria (CBN) has pulled off a “stupendous, credit-positive feat that will will get more coverage as it unfolds”.
While the exact magnitude of the Eurobond offering, anticipated to be unveiled before the mid-year mark, remains undecided, insiders, who preferred to remain anonymous due to the sensitive nature of the information, speculate that the nation might aim to accumulate up to $1 billion in international loans throughout 2024.
This external funding is crucial for Nigeria as it seeks to finance a substantial budget deficit outlined in President Bola Tinubu’s N28.8 trillion ($18 billion) spending blueprint for 2024, targeting a fiscal shortfall of N9.8 trillion, or 3.8% of its GDP.
The deficit is expected to be bridged through local and international borrowings and assistance from global financial institutions.
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The resurgence of Eurobond activities among emerging economies, as observed with successful issuances by Benin, Ivory Coast, and Kenya this year, reflects a broader trend of nations leveraging the international debt market to replenish state coffers after the economic challenges amplified by elevated global interest rates.
Since assuming office in May 2023, President Tinubu has aggressively pursued policies to revitalise foreign investment inflows into Nigeria.
These initiatives range from implementing two devaluations of the naira to foster a more flexible exchange rate regime, narrowing the disparity between the Central Bank’s policy rate and the yields on government securities, to the controversial elimination of fuel subsidies.
In addition to Citibank, JPMorgan, and Goldman Sachs, the Nigerian government has also appointed Standard Chartered Bank and the Lagos-based financial advisory firm Chapel Hill Denham to consult on this venture.
Earlier, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, hinted that Nigeria is contemplating issuing Eurobonds later in the year if the rates are considerably lower, stating that major issuers have informed the country of the possibility this year.