Nigeria’s first domestic foreign currency-denominated bond recorded significant oversubscription, underlining investors’ confidence in the country’s economic outlook.
It was learnt at the weekend that the medium-term $500 million bond witnessed overwhelming subscriptions from local and foreign investors.
It closed as a landmark transaction that ushered in a new window of foreign exchange (forex) to governments and companies.
The Debt Management Office (DMO), which oversees the government’s debt issuances and management, is expected to make final allotment results this week.
Sources with knowledge of the provisional allotments said the offer book was about $1 billion.
A breakdown of the subscription pattern showed considerable appetite by individual retail investors and institutional domestic investors.
There were also appreciable subscriptions by the diaspora community and foreign investors, although the stringent requirements within the week-long offer period appeared to have moderated subscriptions by retail diaspora investors.
An investment banking source said subscriptions were more than $800 million while other sources said the success level of the bond was around $1 billion, 100 per cent above its initial offer size of $500 million.
Sources said the DMO would take advantage of the overwhelming confidence by increasing the final issuance size, thus shortening the cycle of tranches in the bond’s total programme size of $1 billion.
The Series I $500 million Domestic FGN US Dollar Bond, a five-year bond, is the first tranche of the $2 billion bond registered by the Federal Government with the Securities and Exchange Commission (SEC).
The bond’s structure allows the government to absorb oversubscriptions within the limit of the programme’s total size of $2 billion.
Market sources said the success of the $500 million bond will open up a new window of capital raising for other tiers of government and companies, with the maiden sovereign bond serving as a benchmark for subsequent issuances.
They pointed to the development of the corporate Eurobonds, Sukuk, non-interest issuance market and the green bond market, which followed the huge success of the Federal Government’s pioneering offers in those markets.
Sources said the significant oversubscription of the $500 million bond, with a five-year tenor and a coupon of 9.75 per cent per annum, showed that investors were confident Nigeria’s economic reforms would stay the curve.
Reports had indicated in the wake of the opening of the application list two weeks ago that the maiden domestic dollar bond was heading for oversubscription given preliminary book building and general investor appetite.
Experts were unanimous on the historic importance and benefits of the new bond issuance.
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