Nigeria issues $1. 25bn eurobonds at 8.375% with seven-year tenor

As low oil production and leakages continue to undermine Nigeria’s ability to convert higher oil price to increased revenue in its government account, the Debt Management Office, supported by the Ministry of Finance and Central bank of Nigeria hit the international debt market on Thursday, 17 March 2022, issuing $1.25billion Eurobond at a coupon rate of 8.375 percent, a source close to the transaction told Daily Trust.

The bond has a seven-year tenor and  becomes the first emerging market sovereign bond issue since invasion of Ukraine by Russia, demystifying concerns on accessibility of the international debt market, especially for African governments like Nigeria, which are struggling with elevated debt service burden.

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Minister of Finance, Budget and National Planning, Zainab Shamsuna Ahmed, told Reuters earlier this week in far-away Egypt that the government would focus more on domestic borrowing this year, perhaps out of concern on the ability of the country to be able to raise foreign currency loans, given the heightened risk environment and market focus on Russia’s invasion of Ukraine.

Reacting to the sale, Abiola Rasaq, Lagos-based financial analyst, noted: “the success of this transaction validates the fact that markets are open and countries like Nigeria would be able to tap the market, notwithstanding the rising interest rate environment and heightened risk occasioned by the Ukraine event. Albeit there is an associated cost to taping the market at this time and I think Nigeria is paying the cost, with the 8.375 percent being paid on the seven-year paper. That is over 200bps to the cost it just about six months ago and of course some 40bps premium over secondary market levels for the on-the-run notes.”

“That said, it’s a case of limited option, as the country heads towards its general election, and may be faced with much higher risk, hence the pricing may not be better in the months ahead. With the debt service burden rising, the country needs to do more in overhauling revenue strategy and block leakages. With oi production of barely 1.5mbpd, the country is yet again missing the opportunity to leverage high oil price to improve its fiscal position, current account and external reserve levels”, Abiola Rasaq added.

Nigeria in September 2022 raised $4 billion through Eurobond sales. Zainab Ahmed said government would use $2.2b of that amount to fund petroleum subsidy for the year.

Managers of Nigeria’s oil and gas resources have come under severe criticism for the country’s inability to benefit from its rich resources, unlike other oil-producing countries.

As of 30 September 2021, Nigeria’s total public debt stood at U.S.$92,626.41 million, comprising U.S.$37,955.09 million of external debt and U.S.$54,671.32 million of domestic debt, the government said in its Global Medium Term Note Programme, dated March 17, 2022.

On 24 September 2021, Nigeria issued $1,25B at 6.125 per cent bonds due 2028,, $1.5B  at 7.375 per cent bonds due 2033, and  $1,25b at 8.250 per cent. Bonds due 2051, according to the document.