Government announces $2.5 billion dual medium-term bond issue

diamond hope

February 16, 2018 3:48 PM

The government has announced its latest course of action in order to reduce its cost of borrowing.

On Thursday, February 15, 2018, the Federal Government announced the issuance of a $2.5 billion bond to help reduce the cost of government borrowing.

The bond under the government global medium-term note programme is also to help maintain Nigeria’s net debt levels. The notes for the issue announced late last night by the Finance Ministry comprise a $1.25 billion 12-year series and a $1.25 billion 20-year series.

The Finance Ministry statement said the 12-year series would bear interest at a rate of 7.143%, against the 20-year series interest rate of 7.696%. In each case, the bond aimed at maintaining Nigeria’s net debt levels would be repayable with a bullet repayment of the principal on maturity.

The offering is expected to close on or before February 23 subject to the satisfaction of various customary closing conditions. The notes represent the government’s fifth Eurobond issue, following the ones in 2011, 2013 and two in 2017. Proceeds of the notes are expected to be used for the refinancing of the country’s domestic debt.

In line with government debt management strategy, the Debt Management Office, DMO said government planned to achieve a 40:60 ratio for external to domestic debt from the current position of about 25:75, respectively.

Under the arrangement, the DMO said the refinancing plan would involve increasing the external component of the debt portfolio while reducing the domestic.

The DMO said proceeds from the refinancing plan would be converted to Naira and used to redeem relatively more expensive domestic debts.

The offering said to have already attracted significant interest from leading global institutional investors would have a peak order book of a value of over $11.5 billion.

diamond hope