(Bloomberg) -- Nigeria’s first Eurobond sale in over two years is attracting strong investor demand, analysts said, allowing the government to tighten pricing on its $2.2 billion offering.
Proceeds will go toward financing the 2024 budget, according to Patience Oniha, director-general of Nigeria’s Debt Management Office.
The sale reflects investors’ cautious optimism about President Bola Tinubu’s economic reforms, which include rolling back fuel subsidies and allowing the naira to float freely. These measures aim to tackle Nigeria’s chronic fiscal imbalances, but have fueled inflation and sparked a cost-of-living crisis for ordinary Nigerians.
Nigeria is offering a 6.5 year bond and a 10-year bond. Price guidance for the 6.5-year notes narrowed to 10.125%, down from initial indications of 10.375%, while the 10-year tightened to 10.625% from 10.75% said Renaissance Capital Africa.
Despite the revisions, the bonds still offer premiums of about 10 basis points and 40 basis points over secondary market levels, it said.
Initial interest, including reverse inquiries, is estimated at $600–700 million, Renaissance said in a note. The bank expects the bonds to attract strong demand, citing a “decent new issue premium” and investor appetite for scarce sovereign debt issuance from the region.
“This is very likely to be well-subscribed given the limited supply of sovereign issues in Sub-Saharan Africa and Nigeria’s ongoing reforms,” said Samantha Singh-Jami, Africa strategist at Rand Merchant Bank.
Africa’s most populous nation faces a $1.1 billion Eurobond maturity in November 2025, adding urgency to its return to the international debt market. Rated Caa1 by Moody’s and B- by S&P Global Ratings and Fitch, Nigeria has struggled with low tax revenues, oil production disruptions, and widening fiscal deficits.
Investors have demanded higher yields to offset these risks, but Renaissance Capital described the tightened pricing as a “compelling entry point.”
Citigroup, Goldman Sachs, JPMorgan Chase, and Standard Chartered are managing the sale.
Nigeria last sold Eurobonds in March 2022. This year, African nations including Ivory Coast, Cameroon, Senegal, Benin, South Africa, and Kenya, have returned to global markets after being sidelined by rising borrowing costs in 2022.
--With assistance from Ruth Olurounbi.
(Updates with size of offer in lead, analyst reaction)
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