Can Nigeria sustain investors’ buy-in?

Nigeria's recent Eurobond auction has seen a strong buy-in from investors, reflecting growing confidence in the country's economic prospects. Bankole Odusanya, Treasury Chief Dealer at Polaris Bank, attributes this success to Nigeria's high yield in the market compared to other Sub-Saharan African countries like Egypt. With the country's steady cash flow, prospects for growth in oil production, and positive GDP figures, foreign investors are showing significant interest in Nigerian bonds. The recent Eurobond sale, which saw orders four times higher than the offer size, indicates a continued appetite for high-yielding investments in the region. The federal government's sale of $700 million worth of the 6.5-year Eurobond maturing in 2031 at a coupon rate of 9.62% and $1.5 billion of the 10-year tenure at 10.37% demonstrates investor confidence in Nigeria's economic outlook. While these rates are slightly higher than previous issuances, they are still considered attractive to investors seeking higher yields in the current financial market landscape. The government's timing of the Eurobond issuance, aimed at covering a gap for 2024, has been strategic in capitalizing on investor demand. Looking ahead to 2025, analysts anticipate more bond issuances at potentially reduced rates as US Fed rates are expected to decrease. Despite the increasing cost of servicing the country's Eurobond debt, Nigeria's outlook remains positive, with expectations of improved revenues and reduced borrowing in the future. The government's commitment to cost management and revenue enhancement measures such as petrol subsidy removal and energy pricing reforms are projected to contribute to a more sustainable debt profile. To sustain the momentum of investor interest, Nigeria must focus on enhancing the ease of doing business, particularly in critical sectors, bridging the gap between agricultural communities and markets, and supporting SMEs to boost productive capacity and exports. By prioritizing these areas of reform, Nigeria can continue to attract foreign investment and drive economic growth in the years ahead.