The Nigerian government is focusing on retail investors for its $500 million domestic US dollar bond offering, according to a statement from the Debt Management Office (DMO).
This offering is part of a larger $2 billion domestic US dollar issuance program aimed at supporting critical sectors of the Nigerian economy. The DMO’s decision marks a shift from the initial plan to issue a Eurobond as part of efforts to bridge the government’s 2024 budget deficit.
The bond, which is currently open for subscription, is available to local investors, Nigerians in the diaspora, as well as foreign and institutional investors. The five-year bond is denominated in US dollars and offers a coupon rate of 9.75%, with interest payments made twice annually, according to documents reviewed by MarketForces Africa.
One of the key differences highlighted by the DMO between this domestic bond and a Eurobond is the lot size. Eurobonds typically require a minimum investment of $200,000, making them less accessible to retail investors. In contrast, the domestic US dollar bond has a much lower entry point, with a lot size of $10,000, making it more attainable for individual investors.
Additionally, while Eurobonds are listed on Euroclear, the domestic US dollar bonds will be listed on the Nigerian Exchange and FMDQ platform. The bonds, which attract a 9.75% coupon rate, will see both interest and principal payments made in US dollars.
Analysts and investment experts told MarketForces Africa that this bond issuance presents an attractive opportunity, particularly for banks, in light of ongoing issues related to windfall taxes on foreign exchange gains. The Central Bank of Nigeria has also granted the bond liquid asset status, making it eligible for inclusion in the liquidity ratio calculations of deposit money banks.
Experts argue that issuing this domestic US dollar bond is a better strategy for the country at a time when global interest rates remain high. Despite a slowdown in the consumer price index, the US Federal Reserve has yet to reduce its interest rates, making the Eurobond market less favorable.
