“Nigeria Offers 5-Year Dollar Bond at 9.75% Interest”.
The Federal Government of Nigeria has launched a domestic dollar bond, aiming to raise an initial $500 million at a 9.75% yield per annum. This bond, which opened on Monday and is set to close on August 30, has a five-year maturity with semi-annual coupon payments. The bond is part of a broader plan to issue $2 billion in tranches, with the proceeds earmarked for critical sectors of the economy, as approved by President Bola Tinubu.
Wale Edun, Nigeria’s Minister of Finance, highlighted that the bond’s yield is expected to be competitive, benchmarked against similar Federal Government of Nigeria (FGN) Eurobond instruments, specifically the FGN ’29 USD bond. The minimum investment for the bond is set at $10,000, with additional investments required to be in $1,000 increments.
Analysts are optimistic about the bond’s success, predicting strong demand from both local and international investors. The 9.75% yield is particularly attractive when compared to the low returns on idle funds in domiciliary accounts, making the bond an appealing option for investors looking for better returns. Gbolahan Ologunro, a portfolio manager at FBNQuest, noted that the bond’s yield is in line with Eurobond returns, which typically range between 9% and 10%.
The bond will be listed on the Nigerian Exchange Limited (NGX) and FMDQ OTC Securities Exchange Limited, making it accessible to a broad range of investors. The bond’s attractiveness is further bolstered by Nigeria’s credit ratings, which play a crucial role in influencing investor confidence. Fitch Ratings recently revised Nigeria’s credit rating outlook from stable to positive, maintaining the country’s long-term foreign-currency issuer default rating at B-. Similarly, Moody’s has retained Nigeria’s positive credit outlook, keeping the long-term foreign currency rating at Caa1.
The introduction of this bond comes at a critical time for Nigeria, as the government seeks to secure funding for key sectors amid economic challenges. With the bond offering a higher return than what is typically available in the domestic market, it is expected to attract significant interest, providing the government with much-needed capital to support its economic initiatives.
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