Strong investor confidence: Nigeria’s  $2.35 billion  Eurobond sales records 477%  oversubscription

By: ThinkBusiness Africa

West Africa’s largest economy has successfully priced its dual tranche $2.35 billion Eurobond issuance on Wednesday attracting bids that resulted in a colossal 477% oversubscription. The unprecedented demand, with total orders soaring to an estimated $13 billion, marks a significant milestone for the Nigerian government’s reform agenda and its re-entry into the International Capital Market.

A statement from Nigeria’s Debt Management Office (DMO)  said the successful issuance by the, underscores the global community’s bullish outlook on Africa’s largest economy, despite United States president’s recent threat of military invasion over the alleged killing of Christians in the country.

The spectacular oversubscription rate far exceeded the $2.35 billion target, signaling strong international endorsement of the fiscal and monetary reforms being pursued by President Bola Ahmed Tinubu’s administration.

Wale Edun, Nigeria finance minister commenting on the huge investor’s appetite said “this successful market access demonstrates the international community’s continued confidence in Nigeria’s reform trajectory”. He said.

The $2.35 billion dual-tranche sale structure provides  investors with options for long-term maturity:

• First Tranche tenor is 10 years and matures November 13, 2035  with 9.125% coupon rate.
• Second Tranche tenor is  20 years and matures November 12, 2045 with 9.625% coupon rate.

The yields, which were priced at just above 9 percent for the long-dated notes, are considered positive for the government as it manages its debt service obligations, especially when compared to some of its existing Eurobonds that carry double-digit coupon rates.

According to DMO The robust investor appetite came from a geographically diverse pool, including investors from the UK, North America, Europe, Asia, and the Middle East, indicating broad market acceptance of Nigeria’s risk profile.

The funds raised from this crucial Eurobond issuance are earmarked for two primary strategic purposes:

• A portion of the proceeds will be used to part-finance the 2025 fiscal deficit as approved by the National Assembly.
• The issuance will also support the refinancing of an older $1.118 billion Eurobond that is due to mature in November 2025, which is a key component of prudent debt management.

The International Monetary Fund (IMF) during its spring meeting in Washington praised the Nigerian authorities for sound economic policies citing that the country has achieved “macro-economic stability.”

In May,  Moody global ratings upgraded Nigeria’s long-term issuer ratings from Caa1 to B3 and changed the outlook to Stable from Positive.

Similarly, Fitch Ratings had Upgraded the country’s credit rating from ‘B-‘ to ‘B’ with a stable outlook in April.

These upgrades played a part in improving the overall creditworthiness, allowing for better pricing of Nigeria securities.