Nigeria, with its unwavering dedication to fulfilling its debt obligations, showcased its robust financial management once again as it announced the redemption of a $500 million Eurobond borrowed in 2013.
The redemption of this Eurobond, which was part of a dual-tranche USD1 billion issuance, demonstrates Nigeria’s commitment to maintaining financial stability under former President Goodluck Jonathan.
Issued in July 2013, the Eurobond held a tenor of ten years and carried a coupon rate of 6.375% per annum, according to a statement released by the Debt Management Office (DMO). With this recent redemption, Nigeria has now successfully redeemed a total of $1.8 billion worth of securities in the International Capital Market (ICM) since 2013.
The repayment of the $500 million Eurobond joins the ranks of previous successful redemptions by Nigeria.
In July 2018, a similar Eurobond worth $500 million was redeemed, followed by another $500 million Eurobond in January 2021 while in June 2022, Nigeria successfully redeemed a $300 million Diaspora Bond.
This remarkable feat in the international market signifies Nigeria’s adeptness in managing its debt and executing well-planned financial operations. The consistent fulfillment of debt service obligations highlights the country’s commitment to maintaining a strong credit standing and preserving investor confidence.
Nigeria’s proactive approach to debt management has not only resulted in the successful redemption of its Eurobonds but has also contributed to its overall economic resilience. By diligently honoring its financial commitments, Nigeria strengthens its position as an attractive investment destination and builds trust among international investors.
The country’s achievement in debt management underscores its dedication to fostering sustainable economic growth. With each redemption, Nigeria paves the way for a brighter financial future, allowing for increased investment in critical sectors such as infrastructure, healthcare, and education.
Also, Nigeria’s consistent efforts to meet its debt obligations demonstrate responsible fiscal practices, providing a solid foundation for future economic development. By fulfilling its commitments, the country sets a commendable example for other nations grappling with debt management challenges.
Drastic Decline in FGN Bond Listings Raises Concerns Over Government Borrowing
Data from the Nigerian Exchange Limited (NGX) has shown that the value of listed Federal Government of Nigeria (FGN) Bonds on the exchange experienced a decline of 99.9% in the eight months ending on August 31, 2023.
Plummeting from N1.6 trillion recorded during the corresponding period in 2022 to a mere N148.2 billion.
The stark contrast in FGN Bond listings between the two years has raised eyebrows and prompted experts to delve into the implications of this significant shift.
Analysis of NGX data revealed that the bonds listed this year primarily consisted of the FGN Savings Bond and Sukuk, whereas the previous year featured a combination of both Federal Government Bonds and Savings Bonds.
Among the listings, the FGN Sukuk stood out with the highest recorded value of N130 billion for the period under review.
Analysts have identified several factors contributing to the stark decline in FGN Bond listings.
David Adonri, an analyst and Vice Executive Chairman at HighCap Securities Limited, commented on this development, and said, “The reduction of FGN Bond listing could be an indication that the government borrowed less in the domestic market, and its implication is that it could affect liquidity in the secondary market.”
He continued, “The decline could also be that the FGN Bonds were not listed on the Exchange during the period under review as only the Savings Bonds were captured as well as Sukuk.”
Adonri highlighted concerns about the country’s debt profile, both domestically and internationally, saying, “Both externally and internally, the immediate past government had taken more debt. This is increasing the risk of sovereign default and economic nightmares.” He also noted the adverse effects on the real sector, explaining that “the borrowing has now reached the alarming point of crowding out the productive real sector.”
Tajudeen Olayinka, an Investment Banker and Stockbroker, echoed similar sentiments, saying, “If there was an increase in debt listings in the market, it brings about increased liquidity and trading activities in the market, but the drop in the eight-month period could be largely as a result of higher yields in other competing instruments.”
Olayinka also speculated that “the drop in the FGN Bond listing could also be that there was less borrowing by the government in the primary market so not much to offer for listing in the secondary market.”
DMO’s July 2023 FGN Offering Oversubscribed by 182.73 Percent
The Debt Management Office (DMO) on Wednesday reported that its July 2023 Federal Government of Nigeria (FGN) bond offering received overwhelming investor interest, surpassing all expectations with an oversubscription rate of 182.73 percent.
The DMO, responsible for managing the nation’s debt, reopened the market for two 10-year, one 15-year, and one 30-year FGN bonds, collectively valued at N657.84 billion.
The July 2023 offering also recorded a month-on-month increase of 39.03 percent, equivalent to N184.68 billion when compared to the N473.16 billion sold in June 2023.
This was revealed in the FMDQ Exchange financial markets monthly report for July, which was released on Wednesday.
The oversubscribed FGN bond offering in July, combined with the impressive performance in the treasury bills market, where the DMO sold bills valued at N406.10 billion, underscores Nigeria’s fiscal strength.
During the month under review, the Central Bank of Nigeria did not conduct any public OMO bills auctions within the period under review.
The average FGN bond coupon rates in July 2023 dipped across 10-year, 15-year and 30-year segments to 13.05 percent, 14.10 percent and 14.30 percent respectively.
It was also reported that there were no corporate bonds listed on FMDQ Exchange in July 2023 compared to N17.50bn worth of corporate bonds listed in June 2023.
Saudi Arabia Executes $9.5 Billion Debt Buyback and Sukuk Issuance
Saudi Arabia has completed an early purchase of more than 35.7 billion riyals ($9.5 billion) of outstanding debt and will issue about 35.9 billion riyals in sukuk as the kingdom plans to bolster its domestic market.
The government bought a portion of its debt instruments maturing in 2024, 2025 and 2026, the National Debt Management Center said in a statement on Sunday.
The buyback represents the largest early purchase transaction arranged by NDMC.
The Saudi government will issue new sukuk worth 35.9 billion riyals under the Local Saudi Sukuk Issuance Program, NDMC said. The program will be divided into four tranches, with issuances maturing in 2031, 2032, 2033 and 2038.
The initiative is part of NDMC’s efforts to strengthen the domestic market and “to keep up with market developments which have been reflected positively on the growing trading volume in the secondary market,” the agency said.
The transaction will also align NDMC’s efforts with other initiatives to enhance public finances in the medium and long term. HSBC Saudi Arabia, Al Rajhi Capital, SNB Capital, and AlJazira Capital have been appointed as joint lead managers to lead the transaction.
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