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In a First Diaspora Bond, FG Successfully Raises $300m

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  • In a First Diaspora Bond, FG Successfully Raises $300m

There was cause for celebration Monday, when the federal government issued its first diaspora bond in the international capital market, raising the sum of $300 million at coupon rate of 5.625 per cent for a tenor of five years.

The Director General of the Debt Management Office (DMO), Dr. Abraham Nwankwo, explained in a statement Monday that the diaspora bond, which was 130 per cent subscribed, was targeted principally at Nigerians abroad, to provide them with the opportunity to contribute to national development.

According to Nwankwo, the bond was structured as a retail instrument to appeal to a wide range of investors and was offered through private banks and wealth managers, rather than institutional investors, which normally deal in large volume transactions.

He revealed that there was considerable interest from investors from all over the world, with the issue attracting initial orders of about 190 per cent of the offered amount.

Final subscriptions were about 130 per cent of offer at the final price for the transaction.

“The diaspora bond has opened a new source of financing for the Federal Government of Nigeria for funding projects for the development of the country.

“This new window further enhances funding liquidity and flexibility of the Nigerian economy, which are necessary characteristics as the country gathers momentum towards the attainment of advanced economy status,” he said.

Nigeria is the first African country to issue a bond targeted at retail investors in the United States, a market highly regulated by the United States Securities and Exchange Commission (U.S. SEC).

The only previous U.S. SEC registration for an African country was targeted at institutional investors.

The issuance of a bond registered by the U.S. SEC provides an opportunity to access a wide range of investors, Nwankwo explained.
With this development, Nigeria can now routinely access funds from private banks and wealth managers in the U.S. and European markets: this opportunity is not available to other developing countries that have only issued Eurobonds.

Reacting to the successful debt raising, the Minister of Finance, Mrs. Kemi Adeosun, said: “To have received the approval of the U.S. SEC was indicative that the highest level of transparency and accountability in the economic process has been attained.”

She explained that the bond should positively impact the country’s credit rating, transparency rating and financial market development index rating.

“The Diaspora Bond is the first bond issued by an African sovereign registered with both the U.S. SEC and the United Kingdom Listing Authority (UKLA) and targeted at retail investors,” she stressed.

With the successful issuance of the debut Diaspora Bond, Nigeria will establish a programme for raising funds from Nigerians and Friends of Nigeria in Diaspora, as an avenue for continuous participation in the development of the economy.

Market experts also hailed the move by the country, pointing out that Nigeria was able to raise the sum under the very restricted U.S. retail market.

This, according to experts, opened new window for programmed sourcing of diaspora funds.

“Unlike the Eurobond which restricts you to only institutional investors, to be authorised by U.S. and European regulators to issue a retail product means you can now approach wealth managers and private banks. In short, you have no more real restrictions,” one analyst who preferred not to be named, explained.

The international Joint Lead Managers to the issue were Bank of America Merrill Lynch and the Standard Bank of South Africa Limited.

The Nigerian Joint Lead Managers were First Bank of Nigeria Limited and United Bank for Africa Plc.

Prior to its issuance, the presidential aide for foreign affairs and diaspora, Hon. Abike Dabiri-Erewa, had urged all Nigerians to take advantage of the first ever diaspora offer by buying into the bond.

She said her office and Nigerians in the diaspora were excited about the offer, adding that it was a unique way of lubricating the interest of Nigerians abroad to participate in the development projects being carried out by the Muhammadu Buhari administration.

Preparatory to the debt issuance, Nwankwo had led the federal government delegation, comprising officials of the DMO, Ministry of Finance, Central Bank of Nigeria (CBN), and the Budget Office of the Federation on investor roadshows that took place in major cities of the world, including London, New York, Miami and Geneva.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Investment

Escravos Seaport: $27.29 Billion Seaport Project in Jeopardy Amid Bureaucratic Stalemate

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Nigeria is on the brink of losing a $27.29 billion investment earmarked for the development of the Escravos Seaport Industrial Complex (ESIC) in Delta State.

The ambitious project, championed by the Mercury Maritime Concession Company (MMCC) and backed by foreign investors, is stalled due to prolonged delays in securing final governmental approvals.

Rear Admiral Andrew Okoja (rtd), the chairman of MMCC, voiced his concerns during a recent press briefing.

He emphasized the urgency of obtaining the necessary governmental consents, warning that the delay could result in the forfeiture of the crucial investment.

“EDIB International of Hong Kong has expressed readiness to inject $27.29 billion into the deep seaport project located in Escravos. However, without the required approvals from both federal and state governments, we risk losing this investment,” Okoja stated.

The ESIC project is poised to be a significant economic catalyst, promising to transform Delta State and its neighboring regions.

Modeled after the successful Lekki Deep Seaport and Free Trade Zone, the ESIC is expected to spur trade, commerce, and industry across eight states, including the Federal Capital Territory, Abuja.

“This project is not just about developing a seaport; it’s about creating an economic hub that will drive growth and development across a broad spectrum of sectors,” Okoja explained.

In a letter dated January 19, 2024, EDIB International Ltd., through its chairman Kwame Springer, reiterated its commitment to the project. The letter, addressed to MMCC, highlighted the need for a federal government guarantee to protect the investment.

“We require a guarantee from the Nigerian government to secure our investment. The time frame given to secure these approvals is three weeks, beyond which we might have to consider alternative locations for our investment,” the letter stated.

The Escravos Seaport project has seen provisional approvals from both federal and state governments in the past.

In November 2020, the Federal Government granted a provisional approval for a 50-year renewable concession agreement under the Build, Own, Operate, and Transfer (BOOT) model.

Similarly, in May 2022, the Delta State Government agreed to lease 31,000 hectares of land for the project.

Despite these provisional nods, the final approvals remain elusive.

“We have met all regulatory requirements and are ready to proceed. The delay now lies with obtaining the final consent from the government,” Okoja noted.

He urged the federal and state governments to expedite the approval process to avoid losing the investment to other African nations.

The development of the ESIC encompasses not just the construction of a seaport but also the integration of road, rail, and marine connectivity aimed at optimizing cargo flow.

The project includes the construction of the Warri-Sapele Expressway, linking it to key trade routes.

“This infrastructure will significantly reduce congestion at Lagos ports and open up new economic opportunities for the Niger Delta, Eastern, and Northern States,” Okoja highlighted.

The Escravos Seaport Industrial Complex represents a transformative opportunity for Nigeria’s economic landscape.

However, bureaucratic inertia threatens to derail this landmark project. As the clock ticks, the onus is on the federal and state governments to act swiftly and secure the future of this pivotal investment. Without immediate action, Nigeria stands to lose a monumental opportunity to boost its economy and create thousands of jobs.

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Crude Supply Concerns Stall Nigeria’s Modular Refinery Construction Projects

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The ambitious plans for constructing modular refineries across Nigeria, aimed at bolstering domestic refining capabilities, are encountering significant roadblocks due to apprehensions surrounding crude oil supply guarantees.

Despite the country’s aspirations to become self-sufficient in refining, the reluctance of international oil companies (IOCs) to commit to supplying crude to these facilities has left many projects hanging in the balance.

Presently, only a handful of the planned 20 modular refineries are operational, with the remaining projects either stalled or facing financial uncertainties.

This predicament stems from investors’ demands for assurances regarding crude oil availability before releasing funds for construction.

Eche Idoko, the publicity secretary of the Crude Oil Refinery Owners Association of Nigeria (CORAN), highlighted the pivotal role of guarantees in securing financing for refinery projects.

He emphasized that without a guarantee of feedstock, investors are understandably hesitant to proceed with funding.

Idoko further elucidated that the absence of a regulatory framework mandating IOCs to provide such assurances exacerbates the challenges faced by modular refinery operators.

Despite repeated pleas from industry stakeholders, regulatory bodies have yet to enforce provisions ensuring crude supply to indigenous refiners, adding to the uncertainty surrounding these projects.

The ramifications of this impasse extend beyond the economic realm, as Nigeria’s aspirations to emerge as a regional refining hub are jeopardized.

With the potential to significantly reduce the country’s reliance on imported petroleum products, modular refineries represent a critical component of Nigeria’s energy security strategy.

Furthermore, the synergy between modular refineries and larger-scale projects like the Dangote Petroleum Refinery could position Nigeria as a key player in West Africa’s refining landscape.

By addressing the continent’s substantial deficit in refined petroleum products, Nigeria has the opportunity to assert its leadership in the region’s energy sector.

However, unlocking the full potential of modular refineries hinges on overcoming the current challenges surrounding crude supply guarantees. With concerted efforts from regulatory bodies, IOCs, and industry stakeholders, Nigeria can navigate these obstacles and realize its vision of a vibrant and self-sustaining refining sector.

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CBN to Issue N1.56 Trillion in Treasury Bills for Q3 2024

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The Central Bank of Nigeria (CBN) has unveiled its plan to issue N1.56 trillion worth of treasury bills during the third quarter of 2024.

This strategic move aims to manage inflation, finance the government’s budget deficit, and regulate liquidity in the financial system.

Compared to the N1.56 trillion issued in the second quarter of 2024, the upcoming issuance represents a slight decrease of 4.87 percent.

The allocation breakdown for the treasury bills issuance in Q3 includes N170.85 billion for 91-day tenors, N189.35 billion for 182-day tenors, and a significant portion of N1.20 trillion for 364-day tenors.

Treasury bills issuance is a crucial tool employed by the CBN to influence various aspects of the economy.

By adjusting the supply of money in circulation, managing inflationary pressures, and providing a means for the government to fund its activities, these financial instruments play a pivotal role in shaping economic conditions.

The impact of treasury bill issuance extends to households and individuals, influencing interest rates on savings and investments.

As the yields on treasury bills serve as benchmarks for other interest-bearing assets, changes in these rates can affect returns on savings accounts, fixed deposits, and other investment vehicles, consequently shaping the financial landscape for individuals and families.

Moreover, the issuance of treasury bills contributes to the broader economic environment by supporting price stability and fostering conducive conditions for sustainable economic growth.

By absorbing excess liquidity from the financial system, these bills help mitigate inflationary pressures and create an environment conducive to economic expansion and job creation.

However, amidst these efforts to manage inflation and stabilize the economy, challenges persist, particularly regarding high inflation rates.

Inflation erodes purchasing power, making goods and services more expensive and diminishing the real value of savings.

While the CBN’s initiatives to address inflation through treasury bill issuances are commendable, addressing underlying factors such as supply chain disruptions and fiscal imbalances remains essential for long-term economic stability and improved living standards.

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