Business
Investors take FGN $500m bond to oversubscription
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.
The Nation had reported 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.
Managing Director of Financial Derivatives Company (FDC), Mr. Bismarck Rewane, said at the weekend that the successful issuance of the bond will bring significant benefits to the naira.
“The proceeds from the bond issuance, coupled with the CBN’s reintroduction of the Retail Dutch Auction System, which is expected to hold another auction in September, will stabilise the naira.
“A sustained naira stability will ease price pressures, with inflation slowing throughout the remainder of 2024.
“The slowdown in inflation will be supported by the harvest season, base effects, and an import duty waiver,” Rewane stated.
Managing Director, Arthur Steven Asset Management, Mr. Olatunde Amolegbe, said Nigeria has a strange position of having a significant number of its citizens having huge deposits of dollars in domiciliary accounts earning nothing and not contributing significantly to economic activity.
He said the bond provides a platform for those seemingly idle funds to be invested and get good returns while still enjoying the hedging advantage of holding a reserve currency.
“This instrument also provides the Federal Government the much needed dollar liquidity for the forex market which hopefully will lead to the strengthening of the naira.
“This could ultimately have a positive knock-on effect on inflation and consequently interest rates.
“This is also a positive move for the capital markets as it increases product variety and liquidity within the market,” Amolegbe said.
Managing Director, AIICO Capital, Dr Femi Ademola, said the domestic foreign currency-denominated bond is in fulfilment of the promise by the government to attract funding from Nigerians in the diaspora.
According to him, the bond allows Nigerians to invest their foreign currency in dollars, thus removing the fear of a loss of value due to naira devaluation.
“The success of this issuance will be a confidence boost for the country and the current administration.
“It would also allow the government to channel the remittances into more profitable ventures for investors.
“In terms of impacting the financial market, the effect will be the same as the issuance of Eurobonds.
“The instruments would be tradeable in the market thus deepening the market further,” Ademola said.
Managing Director, HighCap Securities, Mr. David Adonri, explained that the domestic dollar bond will enable domiciliary account holders to earn good income on their generally non-interest yielding deposits in Nigerian banks.
He said the bond will reduce capital flight since interest payments will be retained in the local economy.
“Generally, it is an attractive investment outlet for domestic investors who have been yearning for investment in dollar-denominated assets locally. It will deepen the country’s capital market,” Adonri said.
Besides the interest rate of 9.75 per cent per annum, the $500 million bond also qualifies for tax exemption for pension funds and other investors.
It has also been granted liquid assets status by the Central Bank of Nigeria (CBN), implying that banks can use such investments in the calculation of their liquidity ratio (LR).
Trustees and pension fund administrators can also invest in the bond. It is considered as risk-free with the sovereignty and credit of Nigeria as a guarantee.
Also, the Federal Government had entered into an irrevocable commitment that it shall on no account convert or repay the principal amount and interests on the $500 million bond in naira.
According to the Trust Deed for the $500 million bond, the Federal Government pledged an irrevocable commitment that it shall keep fidelity to the nature of the bond as a dollar-based issuance, with both the principal and the coupon to be paid in the currency of issuance.
The Trust Deed is the binding and enforceable legal agreement between the Federal Government and subscribers to the $500 million bond.
Preliminary book-building reports had indicated that there were strong possibilities of a substantial oversubscription, describing the bond as highly attractive.
Market sources had said the pricing was in alignment with the current yield of Nigeria’s Eurobond of equivalent tenor.
Nigeria’s Eurobond of between three and five years currently yield between 9.662 per cent and 10.03 per cent, thus the mid-point pricing of 9.75 per cent is considered attractive.
The bond has the potential to attract a large number of foreign investors, according to most analysts.
“For foreign investors, the price is attractive when compared to yield in the United States, Germany, Japan and the United Kingdom.
“The risk premium for Nigeria’s sovereign risk is adequate,” a senior investment banker had said.
Sources had said there was notable enthusiasm for the first sovereign dollar-denominated domestic bond, with interests cutting across domestic institutional and individual investors, portfolio funds and the Diaspora community.
“I think it’s possible if you look at the universe of potential investors that will be eligible to participate. There is a report that says the dollars held in domiciliary accounts in Nigerian banks are in excess of $20 billion. This represents potential investors.
“There are also lot of very active foreign-currency-denominated mutual funds that are also potential investors.
“There are also Nigerians in the diaspora who are currently earning less than nothing on their investments that will find investing in this dollar bond quite attractive in terms of returns.
“The foreign portfolio investors are also not precluded from investing, and this should also boost patronage.
“So, the chance of an oversubscription is possible,” said a senior investment banker with a speciality in debt issuances.
Another source said the emerging macroeconomic outlook is encouraging to investors, who may seek the opportunity of the dollar issuance to lock in value.
The government had ring-fenced the bond against money laundering and illicit flows by stipulating stringent subscription rules.
Under the guidelines, all corporate or institutional investors are required to provide information on country where the entity is incorporated as well as residency classification, while such corporate application must bear the corporate body’s seal and be signed in accordance with the company’s signature mandate by duly authorised officials.
Pension or provident funds are required to ensure that applications are in line with the guidelines of the National Pension Commission (Pencom) on custody of pension assets.
Individual applicants are required to provide evidence of full payment for the amount applied, full name, Biometric Verification Number (BVN) number, residency classification and regular signature.
Application from a group of individuals should be made in the names of those individuals with no mention of the name of the group.
An application by an illiterate person should bear his or her right thumbprint on the subscription form and be witnessed by an official of the issuing house at which the application is lodged, who must first have explained the meaning and effect of the application to the illiterate person in his or her own language. The witness should indicate his or her name and signature also on the form.
Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, while unveiling the $500 million bond in Lagos, said it was a bold step towards economic transformation as it would further attract both local and international investors.
He explained that the bond issuance would further expand the Nigerian financial system while providing the country the opportunity to tap the huge resources of its Diaspora community.
According to him, with the bond issuance, Nigeria will be able to access foreign currency held by Nigerians abroad, as well as other international investors who believe in the macroeconomic reform initiatives spearheaded by the Tinubu Administration.
Heineken Lokpobiri, minister of state for petroleum resources (oil), says Nigeria will conform with the production quota set by the Organisation of Petroleum Exporting Countries (OPEC).
On June 2, OPEC extended Nigeria’s production quota of 1.5 million barrels of crude per day (bpd) to 2025.
OPEC said Nigeria should maintain the production level till December 31, 2025.
The oil cartel increased Nigeria’s production level to 1.5 million bpd for 2024 at its ministerial meeting on November 30, 2023.
However, Nigeria has been producing below the quota.
Speaking after OPEC’s 56th joint ministerial monitoring committee (JMMC) on October 2, the minister said Nigeria remains fully committed to the objectives of the body’s declaration of cooperation (DoC).
“Nigeria remains fully committed to the objectives of the DoC, and I can confidently confirm that our country is in conformity with the agreed production limits,” he said.
“While we continue to ramp up production in line with our national interests, we are doing so within the framework of OPEC’s guidelines, as we remain committed to balancing responsible production with our economic goals, and continue to meet our obligations under the DoC.”
OPEC RETAINS PRODUCTION OUTPUT POLICY
At the meeting, the oil cartel and its allies, known as OPEC+, retained its oil output policy, including a plan to start raising output in December.
According to a statement by OPEC, the group reviewed the crude oil production data for the months of July and August 2024 as well as current market conditions.
“During the meeting, the Republic of Iraq, the Republic of Kazakhstan, and the Russian Federation confirmed that they had achieved full conformity and compensation according to the schedules submitted for September,” the oil cartel said.
OPEC said the three countries reiterated their resolve to maintain full conformity and compensation throughout the remaining period of the agreement.
Final estimates of September’s crude oil production levels, according to the oil cartel, would be based on authorised secondary sources that would be accessible by the second week of October.
The oil alliance added that it will provide production figures for the nations that are part of the declaration of cooperation (DoC).
“The committee noted the three separate technical workshops between representatives from the Republic of Iraq, the Republic of Kazakhstan, and the Russian Federation and the secondary sources,” OPEC said.
“The meeting was aimed at discussing September production details and submitting their revised compensation plans that include the August overproduction as per the submitted plans to the OPEC Secretariat while also emphasising the need for some members to make further cuts to compensate for overproduction.
“The JMMC emphasised the critical importance of achieving full conformity and compensation. It will continue to monitor adherence to the production adjustments agreed upon at the 37th OPEC and non-OPEC Ministerial Meeting (ONOMM) held on 2 June 2024.
“The Committee will also continue to monitor the additional voluntary production adjustments announced by some participating OPEC and non OPEC countries as agreed upon in the 52nd JMMC held on 1 February 2024.”
Furthermore, according to OPEC, the committee would continuously assess market conditions.
OPEC said the next meeting of the JMMC is scheduled for December 1, 2024.
Resuming from the 1 October Independence Day holiday, trading activities on the Nigerian Exchange Ltd. (NGX) declined by 0.33 per cent on Wednesday, driven by sell-offs in MTN Nigeria and Tier-one banks.
Specifically, the NGX market capitalisation, which opened at N56.635 trillion, lost N187 billion or 0.33 per cent to close at N56.448 trillion.
The All-Share Index also shed 0.33 per cent or 327 points to close at 98,232.39, against 98,558.79 reported on Monday.
Consequently, the All-Share Index Year-To-Date return fell by 331.3 per cent.
Losses in MTN Nigeria, Guaranty Trust Holding Company(GTCO), FBN Holdings, Access Corporation, Dangote Sugar, and Transnational Corporation, among other declined equities, were the primary drivers of the market’s downturn.
Analysis of the market activities showed trade turnover settled lower, relative to the previous session, with the value of transactions down by 92.43 per cent.
A total of 425.76 million shares valued at N8.45 billion were exchanged by investors in 11,954 deals, in contrast to 1.86 billon shares valued at N111.58 billion were exchanged in 10,583 deals posted previously.
Market breadth also closed negative with 32 losers and 26 gainers.
On the losers’ chart, Ellah Lakes led by 9.93 per cent to close at N3.99 per share, while International Breweries led the gainers’ chart by 9.98 per cent to close at N4.41 per share.
Meanwhile, the United Bank for Africa (UBA) led the activity chart in volume and value with 108.02 million shares worth N3.01 billion.
What is the Dollar to Naira Exchange rate at the black market also known as the parallel market (Aboki fx)?
See the black market Dollar to Naira exchange rate for 2nd October, below. You can swap your dollar for Naira at these rates.
How much is a dollar to naira today in the black market?
Dollar to naira exchange rate today black market (Aboki dollar rate):
The exchange rate for a dollar to naira at Lagos Parallel Market (Black Market) players buy a dollar for N1640 and sell at N1680 on Wednesday 2nd October 2024, according to sources at Bureau De Change (BDC).
Please note that the Central Bank of Nigeria (CBN) does not recognize the parallel market (black market), as it has directed individuals who want to engage in Forex to approach their respective banks.
According to the Chainalysis Global Adoption Index, the West African nation ranked second overall, trading roughly $59 billion in cryptocurrency value between July 2023 and June 2024.
About 85% of transfers received in Nigeria are for less than $1 million, with smaller denomination retail and professional transactions being the main drivers of the country’s cryptocurrency activity.
Stablecoins have become an essential part of Sub-Saharan Africa’s crypto economy, making up about 43% of the region’s overall transaction volume, according to Chainalysis research. High inflation readings and the naira’s decline—which caused it to hit a record low in February 2024—are key factors driving the adoption of stablecoins in Nigeria.
Rob Downes, the Head of Digital Assets at ABSA Bank CIB, a significant African bank operating in 12 African nations, disclosed that stablecoin adoption in Africa has been significantly influenced by the widespread foreign exchange (FX) crisis. Chris Maurice, CEO and Co-Founder of Yellow Card, stated that businesses in about 70% of African nations face difficulties accessing the foreign exchange they require to run their operations. Stablecoins offer a welcome substitute in Nigeria, where the naira has suffered severe depreciation.
Maurice further highlighted, “The government and the banks don’t have money, and even if they did, they wouldn’t give it to you.”
“People are starting to see the real-world utility of cryptocurrency, especially in day-to-day transactions, which is a shift from the earlier view of crypto as just a get-rich-quick scheme,” said Moyo Sodipo, COO and Co-Founder of Busha, a cryptocurrency exchange with a presence in Nigeria.
Stablecoins are starting to take precedence over other cryptocurrencies for small to medium-sized transactions, indicating widespread adoption even though cryptocurrencies like Bitcoin and altcoins still hold value and have received billions of dollars in investment. Stablecoins are becoming popular, and DeFi is experiencing significant growth in Nigeria.
Many Nigerians send money overseas using stablecoins because traditional remittance channels are expensive and inefficient. According to Sodipo, “Cross-border remittances are a major use case for stablecoins in Nigeria. It’s significantly quicker and less expensive.”
This aligns with the larger pattern that Sub-Saharan Africa is leading the world in DeFi adoption. Nigeria is at the forefront of this trend, having received over $30 billion in value from DeFi services in the past year.
Dollar-pegged stablecoins like Tether and USDC have grown in popularity, especially in countries battling unstable national currencies and restricted access to hard currency, allowing people and companies to store value, make international payments easier, and promote cross-border trade.
Important to this momentum has been the central bank’s decision to lift its ban on banks working with cryptocurrency companies, which was announced in December 2023. “A lot of opportunities for collaboration and more seamless transactions have arisen since the banking ban was lifted,” Sodipo said.
The Nigerian Securities and Exchange Commission (SEC) launched the Accelerated Regulation Incubation Program (ARIP) in June 2024. Under this program, virtual asset service providers (VASPs) must register and undergo an evaluation process to receive full approval.
The sector is optimistic about ARIP, according to Sodipo, because it represents a move away from uncertainty and a path toward clearer regulations.
Nairametric
Hannatu Musawa, Minister of Arts, Culture and the Creative Economy, has secured a $200 million financing facility with the African Export-Import Bank to support the growth of the country’s creative industries.
Ms Musawa disclosed this in a statement on Wednesday.
The minister said this partnership with the African Export-Import Bank was a crucial component of the Destination 2030 vision and one of the ministry’s ambitious goals for the creative economy.
Ms Musawa urged investors, development partners, and global collaborators “to join us in creating two million jobs and contributing $100 billion to the national GDP.”
Afreximbank president Benedict Oramah, who also announced the partnership in New York, stated that the $200 million facility would support the ministry’s new initiatives for sustainable economic growth.
He emphasised the importance of investing in the creative industry and positioning Africa as a global cultural leader.
“The bank has deployed the Creative Africa Nexus (CANEX) programme to enhance Africa’s share of global trade in creatives and cultural products. Enhancing Africa’s share of global trade would be by offering tailored financial solutions, facilitating technical capacity building, and opening avenues for market access for creative entrepreneurs.
“It is for this reason that we are pleased to be working with the Federal Ministry of Arts, Culture and the Creative Economy to put in place a financing facility in an amount of $200 million. This facility will be used to support new laudable initiatives in support of the creative and cultural industries.
“We are impressed by the commitment and passion of the Ministry and its alignment with the African Export-Import Bank (Afreximbank) creatives’ strategy. We hope that we can work together to entrench this fully and use it to support the industry in a way that boosts pan-African cross-country partnerships,” Mr Oramah said.
The ‘Destination 2030’ initiative aims to establish Nigeria as a global soft power leader by 2030, with clear key performance indicators set by President Bola Tinubu.
As of 2024, the ministry reported a 36 per cent increase in Nigeria’s cultural influence alongside an 18 per cent increase in the Brand Perception Index.
Petroleum marketers have raised an alarm that the Nigerian National Petroleum Company Limited, NNPCL, portal used for the purchase of Premium Motor Spirit (Petrol) has been shut down against dealers, making it impossible to apply for the commodity.
The spokesperson of the Independent Petroleum Marketers Association of Nigeria, Chinedu Ukadike disclosed this in a statement on Wednesday.
According to him, marketers have more than 2,000 pending tickets for the purchasing of 45,000 liters of petrol.
He hinted that the situation may lead to another round of fuel scarcity nationwide.
“I can’t confirm the price now because the portal is still shut down.
“We have more than 2,000 tickets for 45,000 liters (of petrol). That is 45,000 multiplied by 2,000, you can now know the number of million liters it will be. This is just an estimate, you know I don’t work with NNPCL and I don’t know what is on their system,” Ukadike stated.
He added that a 45,000-litre truckload of PMS is around N39.5 million, making N79 billion when multiplied by 2,000.
Reacting to the development, the spokesperson of NNPCL, Olufemi Soneye admitted that the state-owned firm has a significant backlog to address.
He said that the portal closure was intended to prevent the company from holding marketers’ funds for an extended period.
Soneye assured that the portal would soon be reopened; however, he failed to state the date when it would happen.
“We have a significant backlog to address. The closure is intended to prevent us from holding marketers’ funds for an extended period,” Soneye had explained.
“It will be reopened once the backlog has been sufficiently reduced. We are working to address it as soon as possible,” he stated.
The development comes as Nigerians struggle with high energy costs.
Recall that NNPCL in September 2024 announced a fresh price increase for petrol nationwide after lifting the product from Dangote Refinery.
Nigerians currently buy petrol between N950 and N1,100 per liter nationwide.
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