The Federal Government yesterday raised $300 million from its first Diaspora Bond issued in the International Capital Market . The fund was raised at the rate of 5.625 per cent for a tenor of five years, Debt Management Office (DMO) Director-General Abraham Nwankwo said.
He said the Diaspora Bond was targeted at Nigerians in the Diaspora to enable them contribute to national development. The bond, he said, was structured as a retail instrument to appeal to a wide base of investors, adding that it was offered through private banks and wealth managers, rather than the institutional investors that deal in large volume transactions.
“There was considerable interest from investors from all over the world, with the issuance attracting initial orders of about 190 per cent of the offered amount. Final subscriptions were about 130 per cent of offer at the final price for the transaction,” he said.
Nwankwo said the Diaspora bond had opened a new source of financing for projects for the country’s development. This new window, he said, would enhance the funding liquidity and flexibility of the economy, which are necessary characteristics as the country gathers momentum towards the attainment of advanced economy status.
The DMO boss said the bond issuance would attract foreign exchange into the country, serve as a viable way of diversifying government sources of funding, and a means of obtaining cheaper external financing.
It will equally open a new and parallel source of liquidity for the country in the commercial window of the International Capital Market relative to the Eurobond, since this will be targeting different classes of investors.
More than 50 per cent of the N2.21 trillion deficits in this year’s N7.44 trillion budget will be funded through external borrowing.
Finance Minister Mrs. Kemi Adeosun said Nigeria is the first African country to issue a bond targeted at retail investors in the United States, a market highly regulated by the United States Securities and Exchange Commission (US SEC). The only previous US SEC registration for an African country was targeted at institutional investors.
She said the issuance of a bond registered by the US SEC provides an opportunity to access a wide range of investors. In addition, Nigeria can now routinely access funds from private banks and wealth managers in the US and European markets: this opportunity is not available to other developing countries that have only issued Eurobonds. To have received the approval of the US SEC indicates that the highest level of transparency and accountability in the economic process has been attained.
She said the bond would impact the country’s credit, transparency and financial market development index rating. The Diaspora Bond is the first bond issued by an African sovereign registered with both the US SEC and the United Kingdom Listing Authority (UKLA) and targeted at retail investors.
“With the successful issuance of the debut Diaspora Bond, Nigeria will establish a programme for raising funds from Nigerians in Diaspora to provide an avenue for continuous participation in the development of the economy by Nigerians in Diaspora and other Friends of Nigeria,”she said.
In 2013, the country unveiled plans to sell diaspora bonds worth between $100 million and $300 million to Nigerians living abroad. But the government did not appoint a book runner to actualise the plan.
According to the bond issuance plan, a road show was led by Nwankwo. The DMO boss led the government’s delegation to the roadshow because the Finance minister stayed home to deal with the newly signed N7.44trillion 2017 budget. The budget was signed by Acting President Yemi Osinbajo on June 12.7
Source: The Nation