Eurobond buoys Nigeria’s external reserves to record first increase in four months

The nation’s external reserves reversed its four months downward trend, gaining $476 million in three days this week, buoyed by proceeds of the Federal Government’s $2.86 billion Eurobond issue earlier this month.

 

The reserves have been on the downward trend since July 5th, 2018 when it peaked at $47.798 billion, falling by $6.275 billion to $41.523 billion last week Friday. The decline was largely due to capital flow reversal as foreign portfolio investors exit the nation’s debt market. It was also attributable to the increased supply of US dollar by the Central Bank of Nigeria (CBN) in pursuit of exchange rate stability.

 

The reversal of the downward trend came contrary to analysts’ projections that the it would continue till end of this year and may drop to as low as $40 billion. Head of Research, FSDH Merchant Bank, Mr. Ayo Akinwunmi, said the trend reversal may be connected with the $2.86 billion Eurobond recently raised by the federal government.

 

The federal government this month offered $2.86 billion under its Global Medium-Term Note Programme, which attracted significant interest from leading global institutional investors with a peak combined order book of over US$9.5 billion. The federal government this month offered $2.86 billion under its Global Medium-Term Note Programme, which attracted significant interest from leading global institutional investors with a peak combined order book of over US$9.5 billion.

 

According to the Debt Management Office (DMO), “The Notes comprise a $1.18 billion 7-year series, $1.00 billion 12-year series and a $750 million 30-year series. The 7-year series will bear interest at a rate of 7.625 percent, while the 12-year series will bear interest at a rate of 8.75 percent, and the 30-year series will bear interest at a rate of 9.25 percent. In each case, they will be repayable with a bullet repayment of the principal on maturity.

 

The offering is expected to close on or about 21 November 2018, subject to the satisfaction of various customary closing conditions. The Republic intends to use the proceeds of the Notes towards funding of the fiscal deficit and other financing needs. The Notes represent the Republic’s sixth Eurobond issuance, following issuances in 2011, 2013, two in 2017 and one in early 2018 and its first triple-tranche offering.”
– VANGUARD NEWS

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