3 days Ago By Bamidele Ogunwusi
BAMIDELE OGUNWUSI Nigeria’s first-ever domestic US Dollar Bond issuance, where the Federal Government raised over $900 million has demonstrated the appetite of Nigerians and investors for the economic rejuvenation of the country, analysts said. In the beginning The maiden domestic dollar-denominated bond was initially meant to raise $500 million, but instead, it achieved over $900 million in subscriptions. The $500 million bond, coordinated by the Africa Finance Corporation (AFC), marks a pivotal moment in Nigeria’s economic development and highlights the growing confidence in the country’s capital market.
This overwhelming interest from investors highlights the strong domestic confidence in Nigeria’s economic growth prospects, as well as the strategic role of the AFC in deepening the domestic capital markets. What is DDB? The Domestic FGN US Dollar Bond represents a significant opportunity for investors looking to participate in the Nigerian economy while earning returns in US Dollars. With its competitive interest rate, tax benefits, and eligibility for trading on local exchanges, this bond offers a unique investment avenue for both local and international investors.
As the programme unfolds, it is expected to attract significant interest, contributing to the overall economic growth of Nigeria. One of the attractive features of the Domestic FGN US Dollar Bond is that the investment income is exempt from Companies Income Tax, Personal Income Tax, and Capital Gains Tax. This tax exemption enhances the bond’s appeal, particularly for investors seeking tax-efficient investment options.
Additionally, the bond is eligible for inclusion in pension fund portfolios, making it a viable option for pension fund managers looking to diversify their investments. The Federal Government, through the Minister of Finance and Coordinating Minister of the Economy, described it as monumental,l, while the Debt Management Office (DMO) described the achievement as a pivotal step in Nigeria’s economic development. In the issuance of the bond, the Africa Finance Corporation (AFC), acted as Global Coordinator on the first-of-its-kind issuance for Nigeria’s capital market.
The bond, which was issued at par, has a tenor of five years and carries an annual coupon of 9.75 per cent. The issue closed with a 180 per cent oversubscription, underscoring strong domestic investor confidence in Nigeria’s economic stability and growth potential, and the effectiveness of AFC’s strategic capital markets leadership.
As a domestic issue, the investor base comprised Nigerians and non-Nigerians resident in Nigeria, Nigerians in the Diaspora, and institutional investors. The bond will be listed and available for trading on the Nigerian Exchange Limited (“NGX”) and FMDQ Securities Exchange Limited (FMDQ Exchange). The successful issuance demonstrates AFC’s pivotal role in supporting the Nigerian government’s commitment to deepening domestic capital markets, promoting financial inclusion and diversifying funding sources.
It marks the first issuance under the FGN’s Domestic US Dollar Bond Programme. Proceeds of the bond issue will be invested in critical sectors of the Nigerian economy approved by the President on the recommendation of the Minister of Finance, subject to appropriation by the National Assembly. Banji Fehintola, Executive Director and Head of Financial Services at Africa Finance Corporation said, “This inaugural domestic US dollar bond issuance is a significant achievement for Nigeria and marks a new chapter in the development of the country’s capital markets.
“We are honoured to have played a leading role in this landmark transaction as the Global Coordinator, which aligns with AFC’s mission to develop domestic capital markets in Africa by providing innovative financing solutions that meet the continent’s unique needs and also leveraging our deep capital market expertise to serve and deliver value to our clients. “This successful issuance not only showcases Nigeria’s economic potential but also reinforces the benefits of African nations looking inward to tap the deep pool of domestic capital on the continent and taking the lead in financing their development.” AFC has a solid track record in capital markets with a well-established diverse investor engagement program that included the issuance of a US$1.
16 Billion global syndicated loan earlier this year. The Corporation was recently bestowed with “The Most Innovative Bond” award at the EMEA Finance Achievement Awards for its pioneering JPY 75 billion Samurai Bond Guarantee to the Arab Republic of Egypt and the “Best Supranational Syndicated Loan” award for securing a $625 million syndicated loan last year, welcoming new lenders from the Middle East and Asia. Alongside AFC’s role as Global Coordinator for domestic bond issuance, United Capital Plc acted as Lead Issuing House/Coordinator; Meristem Capital Limited, Stanbic IBTC Capital Limited and Vetiva Advisory Services Limited acted as Issuing Houses; Constant Capital Markets & Securities Limited and Iron Global Markets Limited acted as Financial Advisers; Olaniwun Ajayi LP and G.
Elias acted as Solicitors; and Greenwich Trustees Limited acted as Trustee. Naira gains As a result of the oversubscription of the bond, the Naira gained the most in almost two months. The unit surged 4.
8 per cent against the dollar on Wednesday, the biggest increase since July 22, according to data compiled by Bloomberg. The currency closed at 1,558 naira per dollar, its strongest level against the greenback since Aug. 21.
FG speaks The Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, in a statement, said the bond issuance saw an impressive over 180% subscription, highlighting the continued confidence of investors in Nigeria’s economic stability and growth prospects. Priced at par and carrying a 9.75 per cent coupon over five years, the bond is the first under the Domestic FGN US Dollar Bond Programme, established under Presidential Executive Order No.
16 of 2023. The landmark bond issuance attracted a diverse range of investors, including Nigerians and non-Nigerians residing in the country, Nigerians in the diaspora, as well as qualified institutional investors. It will be listed on the Nigerian Exchange Limited and FMDQ Securities Exchange Limited, positioning Nigeria as a key player in deepening its capital markets and promoting financial inclusion.
According to Edun, proceeds from the bond will be directed towards critical sectors of the economy as approved by President Bola Ahmed Tinubu. The Minister noted that the successful issuance underscores the government’s commitment to diversifying its sources of funding and bolstering economic growth despite current economic challenges. Edun expressed confidence in Nigeria’s economic trajectory, describing the bond issuance as extremely successful “The issuance of this inaugural Domestic FGN US Dollar Bond demonstrates that investors, as well as Nigerians, continue to have faith in the country’s economy” the minister said.
The Director General of the DMO, Ms. Patience Oniha, also expressed gratitude to all the parties involved in the transaction. She praised all parties including Africa Finance Corporation as Global Coordinator, United Capital Plc as Lead Issuing House/Coordinator, Meristem Capital Limited, Stanbic IBTC Capital Limited, and Vetiva Advisory Services Limited as Issuing Houses.
Our legal partners, Olaniwun AjayiLP and G. Elias, and financial advisers, Constant Capital Markets and Securities Limited and Iron Global Markets Limited, for their critical roles in structuring and executing the bond. “This transaction was made possible through the expertise and guidance of our advisers.
We also appreciate the continued support of the Nigerian public and our institutional partners who contributed to the successful completion of this historic issuance,” Onihasaid. Speaking further, she said the DMO was very pleased with the remarkable outcome of the exercise. She added in particular that over $900 million, which represented an over 180 per cent subscription when compared to the $500 million that was offered, as well as the diverse investors who subscribed to the Bond, attested to the depth and increasing sophistication of the domestic fixed income securities market.
The DMO reaffirmed the Federal Government’s commitment to collaborating with investors and stakeholders to drive economic growth and development in the country. Analysts’ react Many analysts see the issuance as a bold step by the Federal Government while the oversubscription was seen as an attestation of the readiness of Nigerians and investors in bringing life back to an economy that is under severe economic pressure. Stephen Iloba, an economist, said the move is an indication that all hope is not lost about the economy.
He said, “Nigerians may be experiencing its worst economic predicaments, the issuance and oversubscription of this domestic dollar bond is a welcome development and it brings hope for a better economy in the not too distant time” To Cyril Ampka, the road to economic rejuvenation is not always smooth and all hands must be on deck to bring it into reality. “My position, over the years, has been that Nigeria has great potential and the oversubscription of this maiden domestic dollar bond is demonstration of that”..
