Nigeria has raised $2.2 billion through its latest Eurobond auction, marking a pivotal moment in the country’s ongoing efforts to address its growing fiscal deficit.
This auction, which saw the issuance of two bonds with varying tenors, follows the government’s return to the international capital markets for the first time since March 2022.
The funds raised will primarily be used to support Nigeria’s 2024 budget, which is under strain due to persistent revenue shortfalls and mounting public spending.
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According to sources, who spoke to Nairametrics on Monday, while Nigeria recorded a total subscription of $8.8 billion, only $2.2 billion was allotted.
The allotments are $700 million for the 6.5-year bond priced at 9.625% and a larger $1.5 billion for the 10-year bond priced at 10.375%.
The bonds were issued under the Regulation S/144A structure, making them available to both U.S. and international investors.
This oversubscription reflects continued investor interest in Nigerian debt, though the yields have raised concerns about the country’s financial stability.
Nigeria’s Eurobonds near junk status
While the oversubscription of the Eurobond issuance is a sign of investor confidence, the pricing of the bonds—particularly the 10-year bond at 10.375%—has drawn attention.
These yields are notably high, with some analysts indicating that the country’s debt may be nearing ‘junk status.’ With the 10-year bond priced significantly higher than typical investment-grade bonds, investors are demanding a higher risk premium due to concerns over Nigeria’s economic outlook and creditworthiness.
Several investors expressed surprise at the timing of the bond issuance, especially given the high rates. The yields are considerably higher compared to previous issuances, suggesting increasing concerns about Nigeria’s ability to manage its debt burden.
What you should know
Nairametrics earlier reported that Nigeria is returning to the international capital markets for the first time in over two years with a significant Eurobond offering, aimed at funding the country’s 2024 budget deficit.
The government is issuing $500 million in 6.5-year bonds, alongside a benchmark-size offering of 10-year bonds, with yields expected in the 10.125% area for the shorter-dated securities and 10.625% for the longer maturities.
The bonds will be listed on the London Stock Exchange’s Main Market, and the transaction is set to settle on December 9, 2024. Denominations will start at $200,000, with multiples of $1,000 thereafter.
The proceeds from this issuance will be used to support the Nigerian government’s efforts to bridge the fiscal deficit, which has been widening due to a combination of disruptions in crude oil production, low tax revenue, and insufficient economic diversification.
The Eurobond sale is managed by a consortium of international and domestic financial institutions, including Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., and Standard Chartered Plc, with Chapel Hill Denham Advisory Limited acting as the Nigerian bookrunner.
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