Minister of Finance and Coordinating Minister for the Economy, Dr. (Mrs.) Ngozi Okonjo-Iweala has revealed that the country returned to the capital market after two years of absence and that it sold $1bn bond with ease.
Dr. Okonjo-Iweala made the disclosure on Wednesday in Abuja while briefing newsmen about the recently concluded road show in Europe and U.S. to float the billion dollar bond to international investors. According to her, the bonds, which were four times oversubscribed, were improvements on investors’ response to the $500m bonds floated in 2011.
“The reason we are excited is because, as you know, these are turbulent times, especially following expectations of tapering of Qualitative Easing by the U.S. Federal Reserve Bank,” she said. “So, the fact that Nigeria could go to the bond market, after waiting a while and we got four times our subscription, shows confidence in the strength of the Nigerian economy.”
She added that the transaction attracted top investors primarily from US, Europe and Asia, saying, “The demand was such that we couldn’t meet all of them. Over 200 investors could not get any share of the bonds because we were oversubscribed.”
She stated that the $1bn bond was offered in two categories at the international capital market. While $500m was offered as a five-year bond at 5.125 per cent interest rate, the other $500m was offered as a 10-year bond at 6.375 per cent interest rate.
She added that the two-category offer gave Nigeria the opportunity to achieve an overall cheaper cost of borrowing.
“This rate is much better than what we got when we did $500m in 2011. This means that people have more confidence in our economy which is very significant for us,” she said.
Okonjo-Iweala said that the money was designed to support infrastructural projects within the country and not for budget support.
Her words: “What we have in mind is investment in the power sector. We are looking at funding the transmission grid. As you know, we have privatised both the generation and distribution power plants. But the transmission and grid remain in government hands and we must keep up with transmission in order to make the entire power sector work.
“We are also investing in building a gas pipeline from the east of the country to the west where we have all these power stations with no access to gas. We have already spent about $400 million on it, so we want to complete it with some of the money we are raising now.”
She explained that the Federal Government may invest in the second Niger Bridge and also support the bulk trader adding: the bulk trader is created to support the power market within the country. The bulk trader will come in to help when the distribution company is unable to purchase the power generated.
“When power is generated and there is to be any lapse, the bulk purchaser comes in. That makes the market to work.”
Director-General, Debt Management Office (DMO), Abraham Nwankwo, who was with her, noted that the success of the bond sales is testament of sound economic management and hard work by the Federal Government.
“They acknowledge that Nigeria has been consistent in implementing macro-economic and structural reforms over the past 10 years,” Nwankwo said. “This has led to landmark achievement in the banking sector and great strides in the agricultural s
