FG to raise N140bn, as Diaspora bond’s subscription hits 130%

The Federal Government today, June, 21, (Wednesday), would auction N140 billion ($460 million) in bonds, just as the Debt Management Office (DMO) announced the success recorded in its first diaspora bond at the international capital market, raising the sum of $300 million, which was subscribed by 130 per cent, at coupon rate of 5.625 per cent for a tenor of five years.

The debt office, will sell 40 billion naira of bonds due in 2021; and 50 billion naira each of bonds due in 2027 and in 2037, using a Dutch auction system.Settlement is expected the day after the sale. The bonds are re-openings of previous issues.

The Federal Government, through its debt office, issues sovereign bonds each month to help fund its budget deficit, support the local debt market and maintain a benchmark for companies to follow.

The West African country expects a budget deficit of 2.36 trillion naira this year, as it tries to spend its way out of a recession. It expects to raise money to cover more than half the deficit from the local market.

Consequently, the Director General of DMO, Dr. Abraham Nwankwo, has explained that the Diaspora bond, which was 130 per cent subscribed, was targeted principally at Nigerians abroad, to provide them with the opportunity to contribute to national development.

According to Nwankwo, the bond was structured as a retail instrument to appeal to a wide range of investors; and was offered through private banks and wealth managers, rather than institutional investors, which normally deal in large volume transactions.

He said that there was considerable interest from investors from all over the world, with the issue attracting initial orders of about 190 per cent of the offered amount.
Final subscriptions were about 130 per cent of offer at the final price for the transaction.
The diaspora bond has opened a new source of financing for the Federal Government of Nigeria for funding projects for the development of the country.

“This new window further enhances funding liquidity and flexibility of the Nigerian economy, which are necessary characteristics, as the country gathers momentum towards the attainment of advanced economy status,” he said.
Nigeria is the first African country to issue a bond targeted at retail investors in the United States, a market highly regulated by the United States Securities and Exchange Commission (U.S. SEC).

The only previous U.S. SEC registration for an African country was targeted at institutional investors.
The issuance of a bond registered by the U.S. SEC provides an opportunity to access a wide range of investors, Nwankwo explained.
With this development, Nigeria can now routinely access funds from private banks and wealth managers in the U.S. and European markets: this opportunity is not available to other developing countries that have only issued Eurobonds.