Fed Govt Eyeing Fresh Eurobond Funds

• Fed Govt Eyeing Fresh Eurobond Funds

After raising $1.5 billion from the Eurobond market this year, the Federal Government is expected to access more dollars from the Global Capital Market (GCM) before December.

Report from FBN Capital, the investment arm of FBN Holdings, says the Federal Government may return to the Eurobond market, adding that the heavily-oversubscribed Iraqi sovereign issue last week without United States guarantees was a reminder of the strength of the market.

Two commercial banks – Zenith Bank and United Bank for Africa – had also raised a combined $1 billion through Eurobond in the last six months. The Federal Government raised $1 billion in February and $500 million the following month, while Zenith Bank Plc and United Bank for Africa (UBA) Plc raised $500 million each during the periods.

The Federal Government’s $1 billion Eurobond offer, the fourth since 2011, was oversubscribed by almost 800 per cent. The over-subscription surprised many pundits. The offer, which comes at $200,000 denominations and multiples of $1,000, will mature on February 15, 2032. Citigroup Global Markets Limited and Standard Chartered Bank. Stanbic IBTC Capital are the Financial Advisers.

FBN Capital said the Central Bank of Nigeria (CBN) will also be encouraged by the early signals from the investors’ and exporters’ window (NAFEX). “Turnover from its launch in late April to July 21 totals $4.9 billion. If this market was to take off as a result, for example, of GEM funds taking the plunge, we would be approaching the required critical mass and would have to revise our expectations of MCP,” it said.

The window has impacted positively on the naira. The window, where buyers and sellers are free to agree an exchange rate, was introduced to attract foreign investors and boost the supply of dollars.

The investment and research firm said Nigeria’s gross official foreign exchange reserves increased by $550 million in July to $30.8 billion, quoting data from the CBN.

Its analysis of reserves movement showed that since the recent low at end-October, there has been an accumulation of $6.9billion. Further statistics showed there was an increase of $0.5billion since end of March, when the CBN stepped up its foreign exchange interventions under its multiple currency practices (MCP).

The investment and research firm warned that with the sharp fall in imports, the forexbuffer is comfortable. “By way of warning, we should stress that the figures provided by the CBN are gross and mask the swap transactions it has entered into with banks.The pick-up in oil production has been an obvious positive for accumulation. Officials are encouraging the view that it is back at, or close to the two million barrels per day level,” it said.

FBN Capital explained that given this cushion of reserves and the evidence that core sectors, such as manufacturing, are benefiting from the regular forex interventions, we no longer think that the CBN will be revising its forex policy this year.

The CBN has since January, spent over $8.5 billion to stablise the forex market. The Investors’ & Exporters’ FX Window records about $100 million daily turnover, with the CBN contributing about 15 per cent of the transactions.