Nigeria is issuing a $500 million Euro bond to address 2024 budget deficit. This is the first bond issuance since March 2022 and this time it will be issued in US dollars, making them accessible to international investors.
Also, this is a 6.5-year bonds, alongside a benchmark-size offering of 10-year bonds, with yields expected in the 10.125% area for the shorter-dated securities and 10.625% for the longer maturities.
The bonds will be listed on the London Stock Exchange’s main market while the transaction will settle on December 9, 2024. The denominations will start at $200,000 with multiple of $1,000 subsequently.
The sale will be managed by a group of international and domestic financial institutions like Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., and Standard Chartered Plc.
The government intends to fund the 2024 budget deficit with proceeds from the bond subscription. The budget deficit had been widening due to unstable crude production, poor economic diversification and low tax revenue.
While the government is introducing different policies to address these challenges, it is also looking for a short term way of generating some dollar denominated assets to shore up its revenue. This is coming as the country continues to grapple with rising cost of public spending and a soaring debt profile.
With mounting fiscal pressure and dwindling oil revenue, the Eurobond issuance seem like a viable option to raise money and shore up the budget deficit.
With this bond issuance, Nigeria is showing a strong desire to look for other sources of funding asides from external borrowing. It is also a sign of growing international investors’ confidence in the country’s fiscal reforms. The growing confidence is also reflected in the huge subscription rate the country recorded in the DMO October 2024 auction.
