Will Eurobond outing favour Nigeria?
Nigeria is preparing to tap the Eurobond market again, aiming to raise $2.2 billion to fund the deficit in its 2024 budget. This move comes after the country raised approximately $4 billion in its last Eurobond issuance in 2021. Egie Akpata, the Chairman of Skymark Partners, joins CNBC Africa to discuss whether Nigeria can secure a favorable outcome in this latest bond offering.
Wed, 27 Nov 2024 14:11:58 GMT
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AI Generated Summary
- The recent NPC meeting's 25 basis points rate increase was received with relief, hinting at potential stability in the market amid expectations of a pause in rate hikes.
- The $2.2 billion bond issuance faces challenges in pricing and tenure selection, with constraints around maturity sizes and interest rate thresholds influencing Nigeria's strategic approach.
- The corporate bond market in 2024 remained subdued due to an inverted yield curve, prompting a cautious outlook for 2025 as corporates navigate high interest rate environments and investor preferences.
Nigeria is gearing up to venture into the Eurobond market once again, this time seeking to raise $2.2 billion to bridge the deficit in its 2024 budget. The move follows a successful issuance in 2021, where the country secured approximately $4 billion. Egie Akpata, the Chairman of Skymark Partners, shared insights on the potential outcome of this new bond offering in an interview with CNBC Africa. The recent increase of 25 basis points in the NPC meeting was met with a sense of relief rather than concern by the market. Akpata noted that the market had anticipated a more significant increase, given the previous T-bill auctions' yield uptrend of 4.7% over three weeks. He suggested that the rate hikes may be nearing an end, offering some stability to investors. The bond conversation focused on the pricing strategy for the $2.2 billion issuance. Akpata highlighted several constraints, including the DMO's cautious approach to avoid large maturities exceeding $1.5 billion to ensure manageable payment obligations. The tenure pricing dilemma also loomed, with the 2033 bond trading above 10%, posing a challenge for Nigeria to issue above that threshold. Akpata outlined possible strategies to navigate this, such as targeting maturities between 2029 to 2034, aiming to stay below the 10% mark. Furthermore, the corporate bond market remained subdued in 2024 due to an inverted yield curve, with higher short-term rates overshadowing long-term prospects. Akpata expressed concerns over investor preference for short-term gains, hindering corporate bond activity. Despite some corporates like Dangote exploring the market, high interest rates above 23% were deterring long-term commitments. The outlook for 2025 in the corporate bond arena hinges on potential rate adjustments, as issuers await favorable market conditions. Overall, Nigeria's foray into the Eurobond market signifies a strategic move to address funding needs amidst evolving market dynamics, with careful pricing and tenure considerations driving the bond issuance plans.
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