Nigeria hires advisers for first Eurobond after two years

Nigeria has taken significant steps in the direction of issuing Eurobonds by enlisting the services of top global investment banks such as Citibank, JPMorgan Chase & Co., and Goldman Sachs. Gbite Oduneye, the General Partner at ODBA, conversed with CNBC Africa about this pivotal decision. Amidst the current economic climate, the move to tap into the Eurobond market signals a strategic maneuver by Nigeria to secure much-needed financing after a two-year hiatus. The country has observed successful bond issuances by other African nations like Kenya, Cote d'Ivoire, and Benin, aggregating to $4.8 billion at around 8% in terms of coupon rates. The critical question now revolves around how investors will assess Nigeria's country profile to make informed decisions. Foreign investors have long awaited the removal of subsidies and the floating of the exchange rate in Nigeria. These pivotal reforms have been on the radar of international investors and could potentially influence their appetite for Nigerian bonds. The buzz surrounding Nigeria's Eurobond issuance approximates a figure between one billion to one point two billion and has garnered the attention of financial heavyweights like Standard Chartered and Chapel Hill. The coupon rate will be a crucial determinant, especially amidst Nigeria's eagerness to maximize every available dollar. Global financial conditions are a key factor in the issuance of Eurobonds. The stability and lowering of interest rates in home countries of investors play a pivotal role in their decision-making. With the uncertainty surrounding the war in Russia and fluctuating supply chains, investors are seeking safe and promising investment destinations. Nigeria stands to benefit from this sentiment, especially following the floating of the exchange rate. The negotiations of the coupon rate pose a significant challenge for Nigeria. While investors may demand higher rates due to perceived risk, the government is in a precarious position and cannot afford exorbitant double-digit coupons. Striking a balance between securing favorable rates and meeting investor demands is crucial. The possibility of facing double-digit rates looms large for Nigeria, but the government's economic team is tasked with presenting a compelling case to avoid such high costs. If faced with rates around 12% to 13%, Nigeria might need to make tough decisions. However, it is imperative for the government to cautiously evaluate its options and consider waiting for more conducive financial conditions before making a final commitment. While a slightly higher rate may be acceptable, crossing into unmanageable territories could spell trouble in the long run. The evolving situation surrounding Nigeria's Eurobond issuance necessitates strategic planning and adept negotiation to secure a sustainable financial deal for the country's economic future.