Nigeria Launches $2 Billion Dollar-Denominated Bond for Local Investors

Nigeria has initiated a $2 billion dollar-denominated bond program targeting domestic investors to bridge infrastructure finance gaps.

The program, arranged by United Capital Plc, is designed to attract investments from Nigerians both at home and abroad as well as local pension firms, and aims to raise funds from “domiciliary accounts, diaspora remittances, and foreign investments.”

The first series of the bond program opened on Monday, offering $500 million with a five-year tenure.

This bond issuance is part of a broader strategy to tap into domestic resources amid unfavorable conditions in the international Eurobond market.

As Africa’s most populous nation, Nigeria is seeking to leverage local funding sources to finance its ambitious $18.1 billion spending plan for 2024, which includes a substantial budget deficit of 9.8 trillion naira.

The government has emphasized the importance of domestic borrowing to meet its financial obligations, particularly in light of global economic uncertainties.

The bonds are structured to be accessible to Nigerians residing within the country and abroad, with specific eligibility criteria that exclude recent cash deposits into domiciliary accounts.

Only funds that have been held in domestic accounts for at least 30 days before the bond issuance will qualify for participation.

The decision to issue dollar-denominated bonds locally comes as Nigeria grapples with challenges in accessing the international Eurobond market, where market conditions have been less favorable.

This local bond issuance is seen as a strategic alternative to raise the necessary capital to support the country’s infrastructure projects and other critical needs.

United Capital Plc, the lead arranger of the bond, highlighted the importance of this initiative in an emailed statement, noting that the bond program is not only aimed at raising funds but also at boosting investor confidence in the Nigerian economy.

The bond is expected to provide investors with a stable, long-term investment option while contributing to the country’s development goals.

“This bond issuance underscores the Nigerian government’s commitment to mobilizing domestic resources for national development,” said United Capital Plc. “By targeting funds from domiciliary accounts, diaspora remittances, and foreign investments, the program seeks to engage a broad spectrum of investors and ensure that the nation’s infrastructure needs are met.”

The bond offering is part of a broader fiscal strategy that includes both domestic and international borrowing to finance the government’s approved 2024 budget. With a spending plan of 28.8 trillion naira and a deficit of 9.8 trillion naira, the Nigerian government is exploring various avenues to secure the necessary funding.

This dollar bond program represents a critical step in addressing the country’s financing challenges, particularly in a global environment where traditional borrowing options are becoming increasingly constrained.

As the first series of the bond opens, all eyes will be on investor response and the potential impact on Nigeria’s financial markets and broader economy.

The success of this bond issuance could pave the way for further domestic financing initiatives, helping Nigeria reduce its reliance on external borrowing and strengthen its financial independence.

The program also aligns with the government’s broader economic goals, which include diversifying revenue sources and ensuring sustainable economic growth.