In a surprising turn of events, Nigeria, Africa’s most populous nation, is poised for a return to the international debt market this year, with plans to issue its first Eurobond since 2022. This move follows recent successful issuances by several other African nations, including Benin Republic and Ivory Coast, signaling a renewed investor appetite for the continent’s debt.
However, the path to this ambitious goal is not without its challenges. The uncertainty surrounding Nigeria’s Eurobond plans is palpable, casting a shadow over the country’s financial future.
Patrick Curran, a senior economist at Tellimer, a London-based research firm, recently spoke about Nigeria’s potential to tap into the Africa Eurobond rally. He suggested that Nigeria could indeed tap the market if it wanted to, but would probably have to pay relatively elevated yields of around 10 percent to do so.
This comes in the wake of Kenya’s successful tapping of the international bond market to raise cash and buy back a 10-year Eurobond of $2 billion that matured in June this year. The $1.5 billion bond, which will mature in 2031, was oversubscribed four times, with a yield of 10.375 percent.
In addition, Benin Republic’s first-ever dollar-denominated bond, a $750 million issue, was oversubscribed to the tune of $5 billion on February 7. This bond sale came two weeks after Ivory Coast raised $2.6 billion at a rate of between 8.5 and 8.75 percent in an oversubscribed Eurobond auction.
These recent debt sales in Africa show how investors are snapping up riskier bonds as the prospect of interest-rate cuts in the US takes benchmark yields off their peaks. However, the question remains: Can Nigeria successfully navigate these uncertain waters and achieve its Eurobond ambitions?
Investors are encouraged by the recent devaluation and monetary policy tightening. However, they are waiting to see if the government stays the course by allowing the currency to trade freely and tightening monetary policy further, while also hopefully tackling the issue of fuel subsidies, before turning too bullish.
Last month, the Olayemi Cardoso-led Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) jacked up the main interest rate by 400 basis points to 22.75 percent. The apex bank has mentioned a possible further rate hike at the next meeting this month.
In June, the apex bank merged all segments of the foreign exchange market into the Investors and Exporters window and reintroduced the willing buyer, willing seller model. The liberalisation of the FX regime as part of measures to revive the economy led to a large devaluation of the naira. The currency depreciated from ₦463.38/ to ₦1,615.94/ as of March 13.
The last time Nigeria tapped the international debt market was in March 2022, when it raised $1.25 billion through a seven-year Eurobond. As Nigeria eyes a fresh $2.18bn Eurobond issuance, the world watches with bated breath, hoping for a successful outcome.
In conclusion, while the uncertainty surrounding Nigeria’s Eurobond plans is undeniable, the country’s determination to forge ahead is commendable. Only time will tell if Nigeria can successfully navigate these uncertain waters and achieve its ambitious Eurobond goals. Until then, the cloud of uncertainty continues to loom.
