pin:231B0D40»» •MGN-AFRICA» Nigeria ahead of peers in bond yield performance: At a time when deep and liquid local currency bond markets (LCBMs) are widely recognised as playing important roles in promoting the effectiveness of macroeconomic policies, Nigeria’s subnational bond market yield performance has outclassed South Africa’s and the rest of the continent’s in terms of yield, said the International Monetary Fund (IMF) in its recent World Economic and Financial Survey. The IMF said Nigeria’s subnational bond market has become the largest in Africa with $2.8 billion in outstanding domestic debt, compared with $1.6 billion in South Africa. Reasons behind the burgeoning performance of Nigeria’s bond market, according to the IMF, range from necessary reforms and technical steps by the Nigerian authorities to recent successful corporate international issues. “Nigeria’s bond is performing well. Although the proceeds from the bond represented a relatively minor source of capital financing, the Eurobond’s trading in the secondary market has created a benchmark for future borrowing by the sovereign, subnationals, and firms,” said the IMF. “Accordingly, Nigeria’s subnational bonds market has grown rapidly, becoming the largest in Africa in yields with $2.8 billion in outstanding domestic debt at end-2012 compared with $1.6 billion in South Africa. Some recent Nigerian corporate international issues include the $500 million five-year Eurobond offer by Guaranty Trust Bank, Nigeria, in May 2011.” The IMF said effective road shows facilitated the building of a strong network of potential investors. The road shows in Europe and the United States were geared towards wooing potential investors and telling them about Nigeria’s economic prospects and the government’s economic policy agenda. The result of the shows was, unarguably, spectacular. “Investors’ response was strong. Fund managers and banks across the United Kingdom and the United States subscribed the bond; it was oversubscribed by some 160 percent. The 70 subscribers were from 18 countries. Fund managers and banks subscribed 82 percent of total issuance; 80 percent of investors were located in the United Kingdom and the United States,” the IMF said. Data from the IMF and Nigeria’s Debt Management Office (DMO) revealed that on the basis of distribution by geographic location, investors from the USA committed 38 percent, while Europeans, excluding the English, invested 15 percent. Also, investors from the UK committed 42 percent while others invested 5 percent. On distribution by investors’ category, fund managers invested 70 percent; banks and private banks invested 12 percent; hedge funds committed 10 percent; insurance invested 5 percent, while others committed 3 percent. The Fund added that the use of Eurobond trading as a benchmark in the secondary market is also a source of attraction for investors and contributed to the development of the country’s subnational and corporate bonds. “Nigeria and South Africa have issued international sovereign bonds to provide a benchmark for (other) government and corporate bond markets. Accordingly, international sovereign bond issues complemented domestic bond instruments in providing information for assessing the yield spread at which their foreign currency debt is traded, and served as a reference for international corporate bond issues,” explained the IMF. “In Nigeria, Eurobond trading in the secondary market has been used as a benchmark. This benchmark contributed to the development of Nigeria’s subnational and corporate bonds, with some successful examples of recent international corporate issuances,” it added. The Fund further revealed the three strategic objectives of the issuance as ensuring Nigeria’s presence in the international market, helping to attract foreign direct investment (FDI) by increasing information disclosure, and providing a benchmark for issuances. “In accordance with its B and BB- ratings (respectively by Standard & Poor’s and Fitch’s), the coupon was set at 6.75 percent a year. The bond has been listed on the London Stock Exchange since January 31, 2011,’’ the IMF said. By: ODINAKA ANUDU » bit.ly/19qZv3w @officialMGN
Posted on: Wed, 30 Oct 2013 00:16:09 +0000
Trending Topics
Recently Viewed Topics
© 2015