Nigeria Eyes Return to JPMorgan’s Market Index, Plans $2.5 Bn Eurobond Sale in First Quarter

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    • Nigeria selling dollar bonds to refinance local-currency debt
    • Nation seeks to return to JPMorgan’s local-currency bond index

    Photographer: George Osodi/Bloomberg
    Nigeria may sell $2.5 billion of Eurobonds in the first quarter to refinance domestic debt and wants to start talks with JPMorgan Chase & Co. about being reinstated in its local-currency emerging-market bond index, according to a government official.

    The issuance would complete a dollar-debt program that started with selling $3 billion of Eurobonds in November, said Debt Management Office Director-General Patience Oniha. The yield on dollar bonds due November 2027 have fallen about 60 basis points since they were issued late last year to 5.92 percent, almost eight percentage points lower than the yield on similar maturity local-currency government bonds.

    President Muhammadu Buhari’s administration is selling more foreign debt to help reduce the financing burden from paying double-digit yields on local-currency bonds. That would help free up funds to increase investment in infrastructure and spur economic growth. The International Monetary Fund forecast the economy will expand 2.1 percent this year compared with 0.8 percent in 2017, driven by the oil sector.

    The issuance is “subject to market conditions,” Oniha said in an interview on Wednesday in her office in the capital, Abuja. The whole $2.5 billion could be raised in one go or in tranches, she added.

    Index Inclusion
    The government also plans to begin talks with JPMorgan about being included in its government bond index for emerging markets, said Oniha. The nation’s naira securities were removed in 2015 because of foreign-currency shortages.

    “We would like to get back into the index,” Oniha said. Daily trading volumes for the naira have risen to about $200 million from as little as $20 million three years ago, according to Standard Chartered Plc. That bodes well for discussions on returning to the index, according to Oniha. “The securities trading was never the problem, it was always the foreign-currency liquidity,” which has now improved, she said.

    Here’s more from the interview:

    The government is looking to sell another sukuk — debt that complies with Shariah principles — after the 2018 budget is approved
    The securities are tied to specific projects, Oniha said
    Nigeria in September sold a seven-year sukuk of 100 billion naira ($278 million), and used the proceeds to fund development of 25 roads across the country
    Due to declining borrowing costs in Nigeria, corporate bond sales are expected, probably after the second quarter as the process of issuing improves, Oniha said
    “There is money on the table. Rates are lower. So let’s begin to work on encouraging corporate bonds,” she said
    “The main reason there aren’t many corporate bonds in Nigeria is because interest rates were too high,” she said
    Of the $3 billion raised in November’s Eurobond sale, $2.5 billion went to funding the 2017 budget, and $500 million to refinancing local debt
    Finance Minister Kemi Adeosun said the government is focusing on improving its economy, and indexes will “naturally” return to Nigeria when they see adjustments in line with their requirements.

    “JPMorgan have their own framework of how they evaluate an economy, and when they are ready, when conditions are good, they will list Nigeria again,” Adeosun said in an interview in her office in Abuja
    “We should just move in our own direction. What we need to do is to re-position this economy,” she said
    “JPMorgan or any other index will come naturally. My focus really is on the recovery of the economy. They will come when the macro fundamentals are right. They left because the macro fundamentals were not right,” Adeosun said

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