Sept 11 (Reuters) – Nigeria’s government raised $900 million in its first ever domestic dollar bond sale, the coordinator for the issue said on Wednesday, as it sought to diversify funding sources and avoid elevated yields in international capital markets.

The bond sale will be a welcome source of hard currency for Africa’s largest economy which has experienced crippling dollar shortages that have forced the central bank to devalue the naira twice in less than a year.

The five-year domestic dollar bond comes with a coupon of 9.75%, the coordinator Africa Finance Corporation said in a statement, and received a subscription rate of 180%.

Appetite for the bond showed “the benefits of African nations looking inward to tap the deep pool of domestic capital on the continent and taking the lead in financing their own development,” said Banji Fehintola, Executive Director at AFC.

Proceeds of the bond will be invested in “critical sectors” of the economy, AFC said, without giving more details.

Although frontier issuers like Kenya have been able to raise cash from international capital markets this year, they have been forced to pay interest rates of above 10%.

Nigeria’s 2029 international dollar bond currently yields 9.7%, indicating it might face double digits if it were to tap international bond markets though analysts have said the country can afford to wait longer before doing so.

The domestic dollar bond targeted local investors, pension funds and Nigerians living abroad, whose investments were expected to support the local naira currency.

Domestic and diaspora investors are usually stickier, leaving such securities less prone to big in- and outflows.

Investors will be able to trade the bond when it is listed locally on two exchanges, AFC said.

(Reporting by Libby George and Duncan Miriri; Writing by Alexander Winning; Editing by Karin Strohecker and Christina Fincher)