Nigeria, others raise over $17bn from bonds, says World Bank – TheNigerialawyer

Nigeria, Kenya, Côte d’Ivoire and other sub-Saharan African
countries raised over $17bn from bond issuances in 2018 in what the
World Bank described as a landmark development.

In a report, titled ‘Africa’s Pulse,’ produced by the Office of
the Chief Economist for the African Region at the World Bank and
released during a recent joint Spring Meetings with the
International Monetary Fund in Washington DC, the bank revealed
that over $17bn had been raised from bonds by sub-Saharan African
countries while warning of increasing debt vulnerabilities.

The World Bank said, “In sub-Saharan Africa, 2018 marked a
record year for international bond issuances. Between 2013 and
2017, countries in the region (excluding upper middle-income
countries) issued, on average, a total of $4.5bn per year, with an
average issuance size of $1bn. In 2018, bond issuances totalled
more than $17bn, with the average issuance rising to nearly
$3bn.

“In addition to the increase in issuance volumes, several
countries (Côte d’Ivoire, Kenya, Nigeria) were able to extend
maturities to 30 years.”

The Federal Government in November 2018 said it received a
combined offer of over $9.5bn for its $2.86bn Eurobond. The bond
represents Nigeria’s sixth Eurobond issuance, following issuances
in 2011, 2013, two in 2017 and one in early 2018 and its first
triple-tranche offering.

The Ministry of Finance said the offer comprised a $1.18bn
seven-year series, $1bn 12-year series and a $750m 30-year series.
It added that the government intended to use the proceeds of the
bond towards funding its fiscal deficit and other financing
needs.

The Minister of Finance, Mrs Zainab Ahmed, revealed during the
ministerial briefing at end of the World Bank/IMF Spring Meetings
that the country would later in the year issue N15bn green bond,
having successfully raised N10.92bn in December 2018.

The Governor, Central Bank of Nigeria, Godwin Emefiele, said the
country attracted bonds worth $6bn after the elections, a sign that
the Nigerian bond market remained attractive to investors.

“Following the successful conduct of the general elections in
February 2019, over $6bn has come into the local bond market,
indicating continued confidence in the strength of the Nigerian
economy by investors,” Emefiele added.

While mentioning the Bloomberg’s emerging-market local-currency
government bonds index, which covered major emerging markets such
as Nigeria, South Africa and Argentina, he stated that Nigeria’s
bond continued to top the chart due to the stability of the
Investors’ & Exporters’ FX Window rate and the yields being
high by emerging-market standards.

In spite of this development, the World Bank had warned
sub-Saharan African countries of increasing debt levels and its
attendant vulnerabilities.

“As of end-2018, nearly half of the countries in sub-Saharan
African covered under the Low-Income Country Debt Sustainability
Framework were at high risk of debt distress or in debt distress,
more than double the number in 2013. In addition, safety margins
have decreased in several countries rated as at moderate risk of
debt distress,” it stated in Africa’s Pulse report.

This was re-echoed by the Financial Counsellor and Director,
Monetary and Capital Markets Department, IMF, Tobias Adrian, while
presenting the Global Financial Stability Report at the spring
meetings.

He said, “Nigeria has been borrowing in international markets
but we worry. So, on the one hand, that is very good because it
allows Nigeria to invest more; but on the other hand, we do worry
about rollover risks going forward.

“At the moment, funding conditions in economies such as Nigeria
and other sub-Saharan African countries are very favourable but
that might change at some point. And there is a risk of rollovers
and there is the risk of whether these needs for refinancing can be
met in the future.”

Though the country’s total debt profile as of December 31, 2018,
stood at N24.387tn, the finance minister said there was no cause
for alarm.

At a high-level business meeting with the US business community
held under the auspices of the Corporate Council for Africa, Ahmed
pointed out that although the country’s debt level had been on the
rise, Nigeria had no debt problem rather the challenge was in the
area of revenue generation.

The CCA is at the forefront of strengthening and facilitating
the commercial relationship between the US and the African
continent. The audience was made up of top US investors, some of
them already doing business in Nigeria.

“Our debts are at the levels that are sustainable; what we are
trying to do is to increase our revenues. Our borrowings have been
used to fund critical infrastructure, which will help to expand our
capacity to grow and generate more resources for the country,” she
added.

Ahmed emphasised that Nigeria’s debt levels were within approved
fiscal limits, as the government was committed to its fiscal
sustainability programme.

Similarly, a business mogul and legal practitioner, Jimoh
Ibrahim, backed the minister, saying the country should borrow big
because its debt-to -GDP ratio was relatively low.

In an interview with our correspondent in Washington DC, he
said, “Nigeria’s debt is now equal to Ghana’s debt. Though Nigeria
and Ghana are now equal in terms of debt, our population is
different. Ghana is over 21 million, while Nigeria has 186
million.

“This means that Ghana is clever enough to get more money and
put in infrastructure and if you go to Accra, you will see a lot of
things happening. What is Nigeria supposed to do? Nigeria needs to
get a very clear legal instrument for infrastructure, and then do a
budget for the next 20 years on what to spend on
infrastructure.”

He suggested that Nigeria should borrow $40bn, ask for a
moratorium of 10 years and borrow for 25 years and put all the
money into infrastructure.

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