Activities have continued in the corporate Eurobond market on the back of Fidelity Bank debt issuance.
In a press release posted on the website of Nigerian Stock Exchange (NSE), Fidelity Bank plans to launch up to $500m senior unsecured medium-term debt notes (Eurobond) and a tender offer for the bank’s outstanding $300m 6.875% notes due May 9, 2018.
Some Nigerian issuers like Zenith Bank and UBA have successfully issued Eurobond that was oversubscribed by 7.375 percent and 7.875 percent respectively, signalling continued global investor appetite for Nigerian assets.
The recent improvement in liquidity at the foreign exchange market, underpinned by the introduction of the Investors’ and Exporters’ window and the liberalization of the foreign exchange market has bolstered investors’ confidence that these lenders will honour obligations on money borrowed.
Nigeria, Africa’s largest economy and oil producer, has been hard hit by a sharp drop in oil prices since mid-2014 that stoked a sever dollar shortage, thus hurting many businesses.
The economy shrank by 1.5 percent in 2016 for its first annual contraction as many businesses were unable to access dollars to import raw materials and equipment.
Corporate Eurobond issuances at second quarter (Q2) 2017 YTD of $1 billion (N305.20 billion) were almost on par with 2016 issuances of $1.10 billion (N277.90 billion), according to a report by global accounting firm, PriceWaterhouseCoopers (PWC) Limited.
According to PWC, the decline in government revenue by 14 percent in 2016 as a result of lower oil price forced the government to borrow from the domestic market in order to plunge a N2.20 trillion budget deficit.
“This caused corporate bond yield to increase to levels nearly equivalent to the cost of bank financing, which has discouraged issuers from seeking to fund from the domestic capital market,” said the report.
The Nigerian government is planning on raising $5.20 billion of Eurobond in 3 months in order to fund capital projects and replace local currency bond.
This brings the total debt under President Muhammadu Buhari to $7 billion.
Director General of the Debt Management Office (DMO) has said that government wants to increase the proportion of foreign borrowing to total debt stock from 30 percent currently held to 14.10 percent.
“That will reduce the government’s borrowing costs,” she said. There is an almost 10 percentage-point spread between domestic and foreign borrowing costs and the restructuring debt……