Q1'25 issuance: Will Nigeria secure investors buy-in?

Nigeria is navigating a complex financial landscape as it faces the challenge of funding a 2 trillion naira loan repayment in the first quarter of 2025 amid bond and T-bills issuance. Egie Akpata, Chairman of Skymark Partners, shed light on the intricacies of this situation in an exclusive interview with CNBC Africa. Akpata highlighted the government's daunting task of bridging the gap between maturing bills and newly issued bills, with a shortfall of 2 trillion naira. The deficit, projected at 13 trillion for the year, poses a significant hurdle for the government's financial planning. Despite issuing substantial amounts in the short term through T-bill auctions, there remains uncertainty about how the government will secure the necessary funds given its monthly borrowing needs of over a trillion naira. The looming question of feasibility and realism surrounds the government's targets for bond issuance in the first quarter, totaling between 450 to 600 billion naira. While past struggles to meet such targets have been observed, the potential for a rate reduction due to maturing treasury bills could induce downwards pressure on interest rates, prompting bond investors to act swiftly. Akpata pointed out that such a scenario could lead to a significant drop in rates within weeks, compelling pension fund investors to acquire bonds before rates plummet. The outlook for Nigeria's Eurobond issuance in 2025 appears promising, with an anticipated issuance of around $3 billion likely to be on the cards. The scheduled maturity of $1.1 billion in November signals the need for a strategic Eurobond issuance before or after the maturity. However, the success of this issuance hinges on global market conditions, particularly oil prices, as Nigeria's oil-dependent economy heavily influences investor sentiment. In the realm of corporate debt market prospects, the abnormal market conditions characterized by record-high rates and an inverted yield curve have hampered corporate issuances. Akpata emphasized the importance of rate normalization to entice bond issuers back into the market, with the potential for a substantial drop in rates throughout the year reigniting corporate bond issuances. As Nigeria navigates the shifting tides of its financial landscape, the need for strategic financial planning and market responsiveness becomes increasingly imperative. The government's ability to secure investors' buy-in amid mounting financial obligations will be a crucial determinant of its financial stability and market confidence in the quarters ahead.