Nigeria has shortlisted two bookrunners for a $500 million debut global bond which it plans to issue before the end of the year, the head of the debt management office (DMO) said on Tuesday.
The planned 10-year bond, whose issue has been repeatedly pushed back, will set a benchmark in the international capital market for sub-Saharan Africa’s second-biggest economy, allowing state governments and companies to follow suit.
“Two firms have been shortlisted as bookrunners, and they will also serve as the issuing house.
“The federal ministry of finance will announce the name of the firms,” DMO director-general Abraham Nwankwo said.
Nigeria first announced plans for the debut international bond in September 2008, but put the plans on hold citing adverse market conditions.
Nwankwo said he did not expect the recent revision of Nigeria’s credit outlook to negative from stable by ratings agency Fitch to have any impact on investor interest in the issue.
Ratings agency Standard & Poor’s yesterday affirmed its “B+” long-term and “B” short-term foreign and local currency sovereign credit ratings on Nigeria, with a stable outlook.
Nigeria last month named London-based Barclays Capital and FBN Capital, a subsidiary of Nigeria’s First Bank, as its financial advisors for the bond.
Finance minister Olusegun Aganga has said he has been advised there is enough interest in the planned bond for Nigeria to raise $1 billion but that the country is not tempted to go above the planned $500 million for now.
He said the sole aim was to set a benchmark in the international market rather than to raise funds and that Nigeria had access to cheaper financing if needed.
Nwankwo said Nigeria’s debt-to-GDP ratio of 16% was expected to remain stable next year, depending on the rate of economic growth, suggesting the country could comfortably raise more debt if it decided it wanted to do so.
He said 14 local companies were preparing bond issues in Nigeria’s fledgling corporate debt market and that more were expected to follow suit after the Eurobond was issued.
Guaranty Trust Bank listed the country’s first corporate bond in four years in March and analysts expect the market to deepen as local pension funds and asset managers become more comfortable with fixed income and less reliant on equities in their portfolios.
Also in March, Nigeria removed all taxes on corporate debt issues and cut transaction fees, allowing firms to raise capital at lower coupon rates and offer tax-free returns to investors.