Nigeria issues two Eurobonds with yields over 10%

Nigeria is returning to the international capital markets for the first time in over two years with a significant Eurobond offering, aimed at funding the country’s 2024 budget deficit.

The government is issuing $500 million in 6.5-year bonds, alongside a benchmark-size offering of 10-year bonds, with yields expected in the 10.125% area for the shorter-dated securities and 10.625% for the longer maturities.

This marks the country’s first Eurobond issuance since March 2022. The bonds will be issued in U.S. dollars, with semi-annual coupons, and are structured in 144A/Reg S format, making them accessible to both U.S. and international investors.

The bonds will be listed on the London Stock Exchange’s Main Market, and the transaction is set to settle on December 9, 2024. Denominations will start at $200,000, with multiples of $1,000 thereafter.

The proceeds from this issuance will be used to support the Nigerian government’s efforts to bridge the fiscal deficit, which has been widening due to a combination of disruptions in crude oil production, low tax revenue, and insufficient economic diversification.

The Eurobond sale is managed by a consortium of international and domestic financial institutions, including Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., and Standard Chartered Plc, with Chapel Hill Denham Advisory Limited acting as the Nigerian bookrunner.

Nigeria’s credit ratings remain under pressure, with a Caa1 (positive) rating from Moody’s and a B- (stable) rating from both S&P Global Ratings and Fitch Ratings. The issuance is seen as a critical step in managing the country’s fiscal challenges and addressing the growing burden of foreign debt.

The government has also been grappling with the rising costs of public spending, which have strained its finances.

In the first six months of 2024, Nigeria recorded N4.56 trillion deficit, which is 3.72% of its Gross Domestic Product (GDP).

Last month, the government announced plans to raise $2.2 billion from foreign investors to plug this budget shortfall.

This amount was to include $1.7 billion Eurobonds and $500 million Islamic Sukuk bonds. It appears the Federal Government plans to get about $1.2 billion from its 10-year Eurobond.