Nigeria Raises $3bn at International Capital Market
The Minister of Finance, Mrs Kemi Adeosun, says Nigeria has raised $3bn at the international capital market. She made this known in a statement issued by Mr Oluyinka Akintunde, the Special Adviser, Media and Communications on Wednesday in Abuja.
She said the Notes comprised a $1.5bn 10-year series and a $1.5bn 30-year series. “The 10-year series will bear interest at a rate of 6.5 per cent, while the 30-year series will bear interest at a rate of 7.625 per cent.
By raising $1.5bn of 30-year notes, Nigeria has emulated a number of our international contemporaries, including Brazil, South Africa, Argentina and Egypt to issue long-dated debt as the basis for long-term infrastructure financing. It will also establish a benchmark for the private sector to extend the tenure of its own financing.
This is critical to delivering an environment within which both the government and the domestic private sector can rapidly enhance its ability to fund investments in infrastructure projects and broader project financing. The full $1.5bn proceeds of the 30-year notes are allocated to 2017 capital projects.
According to her, the 30-year notes will benefit Nigeria because it demonstrates strong investor confidence in the Nigerian economy and growth, while providing the long-term funding required to finance infrastructure projects at affordable interest rates. She said the provision of infrastructure was critical to the long-term sustainability of the nation’s economic growth and would provide a more productive economy for current and future generations of Nigerians.
They also provide a benchmark for long-term private sector funding, she added. She said the proceeds would be split between the 2017 budget capital projects ($2.bn) and re-financing some of the nation’s short-term domestic debt ($500m).
Capital projects under the 2017 budget include roads, rail, power and housing projects which are crucial to the delivery of the economic recovery and growth plan. Adeosun said Nigeria raised a further $1.5bn of 10-year notes, and presently had a full ‘basket’ of international debt notes, including five-year, 10-year, 15-year and 30-year issuances trading in the market.
She said this provides international investors with the full range of tradable options in Nigeria’s international debt. According to her, of the $1.5bn of 10-year notes, $1bn will be allocated to the 2017 capital budget under the $2.5bn approval from the National Assembly.
She said the balance of $500m allocated to the refinancing of domestic debt was in line with the nation’s strategy to re-balance its domestic/international debt profile. She, however, said the full amount of $5.5bn approved by the National Assembly was not raised because it was approved in two separate resolutions.
“One for $2.5bn to fund capital expenditure in the 2017 budget, and one to re-finance existing domestic debt of $3bn, which is not time bound. Our intention for this issuance was to meet our short-term requirement to fund $2.5bn for the 2017 budget. Following significant investor interest of over $11bn, we brought forward a further $500m of funding toward the refinancing of existing domestic debt and will assess options for concluding the refinancing process in the New Year.
Restricting this issuance to $3bn also enabled us to optimize the price of the notes, which at 6.5 per cent (10-year) and 7.625 per cent (30-year) are significant improvements to our existing portfolio. On the issue of re-balancing the nation’s debt portfolio and increasing international borrowing, she said Nigeria had over the last five years, been overly focused on domestic debt, which was short term and high cost.
This means that we pay too much and have to regularly refinance existing debts rather than having the security of longer term instruments. You can see this clearly reflected in our debt service to revenue ratio, which at 45 per cent as of Third Quarter (Q3) 2017, is higher than we would like.
Having returned the economy to growth in 2017, and secured a stable and liquid exchange rate regime, we are focused on addressing this issue by diversifying our sources of debt to achieve an optimal balance. So far, we have moved our domestic/international debt ratio from 18:82 to 23:77 and we expect this to improve to circa 27:73 by year end, with an ultimate target of 40:60.
This will deliver significant savings in our debt service costs, with provisional estimates demonstrating savings of up to N91 billion in 2018 alone.