{{Nigeria comfortably raised $1 billion in its return to the Eurobond market on Tuesday, taking advantage of a short period of relative calm in otherwise turbulent markets to issue both a long and shorter-dated bond.}}<\/p>\n
The issue was four times oversubscribed, with just over $4 billion in bids, a source told Reuters – underscoring still buoyant investor appetite for scarce frontier African paper, despite a recent selloff in emerging market assets.<\/p>\n
“We’re very happy that at this time, when the markets are exhibiting turbulence, we were able to (achieve) … four times oversubscription,” Finance Minister Ngozi Okonjo-Iweala told a journalists’ conference call after the issue.<\/p>\n
“The coupon shows confidence in the Nigerian economy,” she said, adding that the money would be spent on infrastructure.<\/p>\n
Africa’s top oil producer issued a $500 million 5-year bond at a yield of 5.375 percent and a $500 million 10-year bond with a yield of 6.625 percent, according to IFR, a Thomson Reuters news and analysis service.<\/p>\n
The 5-year paper received bids of $1.77 billion and the 10-year of $2.26 billion, the source said.<\/p>\n
By comparison, Nigeria’s debut $500 million 10-year Eurobond, which it issued in 2011, received bids worth two and a half times the amount on offer.<\/p>\n
The yield on the 10-year bond is less than the 7 percent the West African country paid in 2011, but higher than what it could have paid if it had issued just a few months ago, analysts said.<\/p>\n
“We saw a window of opportunity … appetite for our paper was strong,” Okonjo Iweala said.<\/p>\n
“OPEN WINDOW”<\/p>\n
The 2021 bond traded at a 5.92 percent yield on Tuesday but was 3.66 percent at the start of the year.<\/p>\n
A rise in U.S. Treasury yields since late April and comments by U.S. Federal Reserve chairman Ben Bernanke about tapering its bond-buying program have pushed up yields on African Eurobonds by up to 300 basis points in some cases.<\/p>\n
Most Eurobonds rallied this week. Nigeria decided to take advantage of the improved conditions ahead of the release of U.S. non-farm payrolls on Friday, said Nicholas Samara, vice president in capital markets origination at Citi, one of the lead managers along with Deutsche Bank.<\/p>\n
Strong non-farm payrolls could heighten fears of an end to the Fed’s quantitative easing.<\/p>\n
Wednesday was also a no-go, he added, as it will be a busy trading day ahead of the July 4 holiday in the U.S.<\/p>\n
“It’s an opportunistic trade today that Nigeria, alongside other issuers, have done,” Samara said. “Today was an open window. Come Friday, if you have strong non-farm payrolls the next opportunity possibly could be September.”<\/p>\n
Nigeria’s domestic debt was about 18 percent of GDP in 2012 and external debt was 2.5 percent of GDP, lower than its peers.<\/p>\n
But investors remain wary of the country’s tendency to squander its oil windfall. The oil savings account had $9 billion in it last December. Okonjo-Iweala admitted it was now down to around $5 billion, but she said it was merely performing its function in helping cushion the against commodity shocks.<\/p>\n
Inflation is in single digits and investors are optimistic about power sector reforms, seen as key to unlocking growth.<\/p>\n
Samir Gadio, emerging markets strategist at Standard Bank, said the rally in emerging market Eurobonds in the past few days could have enough momentum to see yields fall further.<\/p>\n
“That said, the government will still have to pay a higher external funding cost than what it could have secured a couple of months ago,” he said.<\/p>\n
{reuters}<\/p>\n","protected":false},"excerpt":{"rendered":"
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