Nigeria has successfully raised $2.2 billion through its latest Eurobond auction, a significant milestone in the country’s ongoing efforts to address its increasing fiscal deficit. This auction involved the issuance of two bonds with different maturities and marks the government’s return to the international capital markets for the first time since March 2022.
The funds raised will primarily support Nigeria’s 2024 budget, which is under pressure due to ongoing revenue shortfalls and rising public spending. According to sources who spoke to Nairametrics on Monday, Nigeria received total subscriptions exceeding $9 billion; however, only $2.2 billion was allotted.
This allotment includes $700 million for a 6.5-year bond priced at 9.625% and a larger $1.5 billion for a 10-year bond priced at 10.375%. The bonds were issued under the Regulation S/144A structure, allowing them to be accessible to both U.S. and international investors. The oversubscription reflects sustained investor interest in Nigerian debt, although the high yields have raised concerns about the country’s financial stability.
While the oversubscription of the Eurobond issuance indicates investor confidence, the pricing of the bonds—especially the 10-year bond at 10.375%—has drawn attention. These yields are significantly high, leading some analysts to suggest that Nigeria’s debt may be approaching ‘junk status’. The 10-year bond’s pricing is much higher than typical investment-grade bonds, as investors are demanding a higher risk premium due to concerns regarding Nigeria’s economic outlook and creditworthiness. Several investors expressed surprise at the timing of the bond issuance, especially given the elevated rates. The yields are considerably higher compared to previous issuances, indicating growing concerns about Nigeria’s ability to manage its debt burdens.
On Monday, the Debt Management Office (DMO) announced the successful issuance of Eurobonds. The DMO highlighted that the bonds attracted a diverse array of investors from several regions, including the United Kingdom, North America, Europe, Asia, the Middle East, and domestic Nigerian investors.
The DMO’s statement read: “The Federal Republic of Nigeria successfully priced $2.2 billion in Eurobonds maturing in 2031 (6.5-year) and 2034 (10-year) in the international capital markets on December 2, 2024, with $700 million and $1.5 billion allocated to the 2031 and 2034 maturities, respectively. The bonds were priced at a coupon and re-offer yield of 9.625% and 10.375%, respectively.” Nigeria expressed satisfaction with attracting a broad range of investors from multiple jurisdictions.
This, they believe, reflects continued investor confidence in the country’s macroeconomic policy framework and prudent fiscal and monetary management. The statement noted that the transaction managed to achieve a peak order book of more than $9 billion, demonstrating strong support across various regions and investor classes. Demand came from a combination of fund managers, insurance and pension funds, hedge funds, banks, and other financial institutions.
In the statement, Nigeria’s Finance Minister, Mr. Olawale Edun, emphasized the confidence in President Bola Tinubu’s administration to stabilize the Nigerian economy and promote sustainable growth. He pointed to the strong investor interest in the Eurobonds as an indication of increasing confidence in Nigeria’s economic direction. Moreover, the Governor of the Central Bank of Nigeria, Olayemi Cardoso, highlighted the positive outcome as reflecting investor confidence and improved liquidity and market access in Nigeria.
DMO Director-General, Patience Oniha, celebrated this landmark achievement, citing robust investor demand (4.18 times the offer size) and the competitive pricing of the new 6.5-year and 10-year bonds, priced at 9.625% and 10.375%, respectively. The DMO also reaffirmed its commitment to maintaining transparency and ongoing engagement with investors.
The government is issuing $500 million in 6.5-year bonds, alongside a benchmark-sized offering of 10-year bonds, with expected yields in the vicinity of 10.125% 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 increments of $1,000 thereafter. The proceeds from this issuance will be used to assist the Nigerian government in bridging its widening fiscal deficit.