Government successfully raises $9.5bn through the sale of bonds to fund the 2018 budget

GOVERNMENT ministers have successfully raised $9.5bn from the sale of bonds as part of a desperate attempt to raise the necessary finance to fund the 2018 budget which had faced the risk of not being met due to falling oil revenue.

In an attempt to speed up infrastructural development, the federal government had proposed a 2018 budget of about $25bn but implementation was threatened by lower-than-expected government revenue. With Nigeria's economy only growing at a limited rate of 1.9% and international oil prices only currently standing at about $65 a barrel compared with say $100 four years ago, government revenue is limited.

Faced with the challenge, the federal government has raised funds from its external debt requirements to finance the 2018 budget at a considerably lower cost than projected. Capital raised from the sale of these government bonds will now be used to fund the infrastructure aspects of the budget, which have always been the projects to suffer whenever there is a paucity of funds.

Finance minister Zainab Ahmed, said: “Nigeria is investing strategically in critical capital projects to bridge our infrastructure deficit, provide a better operating environment for the private sector and improve the standard of living of our citizens. The proceeds of this issuance will provide critical financing for projects in transportation, power, agriculture, housing, healthcare and education as well as the capital elements of our social investment programmes."

Finance ministry spokesman Paul Ela Abechi, added that Nigeria successfully raised the funds despite significant oil and wider macro market volatility. He noted that the successful transaction follows closely behind Nigeria’s engagement with the Fitch rating agency and their subsequent decision to change the outlook on Nigeria’s sovereign rating from B+ (negative) to B+ (stable), based on improving macro-economic fundamentals.

Mr Abechi added: “The Federal Republic of Nigeria today announces that it has priced its offering of $2.86bn aggregate principal amount of triple series notes  under its Global Medium Term Note Programme. The offering has attracted significant interest from leading global institutional investors with a peak combined order book of over $9.5bn, which reflects an over-subscription of more than three times and demonstrates the on-going confidence of international capital market investors in Nigeria’s investment story.

These notes comprise a $1.18bn seven-year series, a $1bn 12-year series and a $750m 30-year series. The seven-year series will bear interest at a rate of 7.625%, while the 12-year series will bear interest at a rate of 8.75% and the 30-year series will bear interest at a rate of 9.25%. and in each case, they will be repayable with a bullet repayment of the principal on maturity.”

He added that the offering is expected to close on or about November 21 subject to the satisfaction of various customary closing conditions.  According to Mr Abechi, Nigeria intends to use the proceeds of the notes towards funding of the fiscal deficit and other financing needs.

These notes represent Nigeria's sixth Eurobond issuance, following issuances in 2011, 2013, two in 2017 and one in early 2018 and its first triple-tranche offering, Mr Abechi said. When issued, the notes will be admitted to the official list of the UK Listing Authority and available to trade on the London Stock Exchange’s regulated market.