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FG to issue $1bn Eurobond in Q3 2016

…To secure $3bn WB, AfDB loan
Naira depreciates to N375/$
*As depreciation impairs terminal operators’ earnings by 238% —Report

By Babajide Komolafe, with agency reports/Godwin Oritse

The Federal Government has said it would issue $1 billion Eurobond in the third quarter of this year towards its securing of $3 billion loan from the World Bank and African Development Bank.

The development came as the naira, yesterday, depreciated sharply to N375 per dollar in the parallel market due to increased speculation driven by anxiety over non-release of details of the flexible exchange rate announced by the Central Bank of Nigeria, CBN, last month.

This is as declining value of the naira against the United States dollar and other international currencies has eroded the value of seaport terminal operators’ earnings by about 238% over the past ten years.

Addressing a meeting with international investors in London on Tuesday, Minister of Finance, Mrs. Kemi Adeosun, said Nigeria might issue a $1 billion Eurobond in the third quarter and that it was close to securing $3 billion of funding from the World Bank and African Development Bank.

Kemi Adeosun
Kemi Adeosun

According to Kevin Daly, a money manager at Aberdeen Asset Management Plc, who attended the talks, Adeosun said the government was committed to a budget deficit of not more than N2.2 trillion ($11.1 billion), or 2.1 percent of Gross Domestic Product, GDP.

Nigeria has sold dollar bonds twice, the last time in mid-2013, when it raised $1 billion of five- and 10-year debt.

The government has said it would fund the fiscal gap with about $10 billion of debt, half of it in foreign currencies.
Yields on Nigeria’s $500 million of securities maturing in July 2023, fell five basis points to 7.44 per cent in London by 10:22 a.m. and have dropped 1.2 percentage points this year.

Nigeria’s Eurobonds have gained 8.5 percent in 2016, compared with the average of 10.4 percent for high-yielding emerging-market sovereign dollar-debt tracked by Bloomberg.

Three-month naira forwards dropped 0.2 per cent to 274.5 per dollar, suggesting traders see the currency trading near that level in coming months.

Adeosun said Nigeria would probably post budget deficits for at least three years and that its debt-to-GDP ratio would rise to 20 percent from around 13 percent in that period, according to Gregory Kronsten, an analyst at Lagos-based FBN Quest who was at the meetings.

CBN Governor, Mr. Godwin Emefiele, said on May 24 after the last Monetary Policy Committee meeting that a new foreign-exchange system would be announced “in the coming days.”

The central bank was represented at the London meetings by  Alvan Ikoku, its Director for Trade and Exchange.

“The director confirmed that in line with the recent MPC statement, it was discussing how to implement a more flexible foreign-exchange regime,” said Richard Segal, an emerging market analyst at Manulife Asset Management.

“The central bank said there would be some kind of announcement relatively soon.”
Naira depreciates to N375/$

Vanguard investigation reveals that the parallel market exchange rate rose from N360 per dollar on Tuesday to N375 yesterday, implying N15 depreciation of the nation’s currency.

Meanwhile, the declining value of the naira against the United States Dollar and other international currencies has eroded the value of seaport terminal operators’ earnings by about 238% over the past ten years.
Nigeria has the largest economy in Africa but growth prospects and per capita GDP forecasts fell significantly lower than expectations

According to the report prepared by an audit firm, the terminal operators, who have invested over N200billion between 2006 and 2015, have lost an estimated N58.9billion in earnings over the period.

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