DMO Boss Lists Benefits of Accessing International Capital Markets

Goddy Egene

The Director General of Debt Management Office (DMO), Ms. Patience Oniha has said that the decision of the federal government to borrow offshore will reduce the debt cost and allow companies to borrow in the local market for productive purposes and economic development.

The federal government has accessed the international capital market about three times this year to raise funds needed to finance budget deficits in 2016 and 2017. However, there have been apprehension that repaying those debts in foreign currency would have negative impact.

However, Oniha said the funds being raised from ICM have lower rate compared to the domestic market. She added that since the federal government has been accused of crowing out corporate borrowers from the domestic market, going to the international market will give opportunity to local borrowers to access funds in the domestic market.

“Specifically, the decision to borrow from the ICM is in line with the government’s determination to implement a very prudent fiscal and debt management strategy to reduce the cost of debt,” she said.

Oniha, who spoke in Lagos during the listing the FGN 30 year $1.5 billion Euro Bond, FGN 10 year $1.5 billion Euro Bond, FGN 5 Year $300 million Diaspora Bond on Nigerian Stock Exchange (NSE), said the listing would increase the number and range of securities available in the domestic capital market thereby, deepening the market and promoting financial inclusion.

She added that it would give more visibility to the domestic debt capital market which will be beneficial for attracting capital from local and foreign investors.

“In the specific case of the Eurobonds, because it is a sovereign security, the information it will provide such as Coupon, Yield and Tenor will serve as benchmarks for corporate who may issue Eurobonds in the ICM,” she said.

According to her, the government priced the five-year $300 million Diaspora bond at 5.625 per cent, saying the security was registered by the United States Securities and Exchange Commission.

“The Diaspora Bond provided an opportunity for Nigerian in the Diaspora to contribute to the development of the nation. While the bond had its primary listing on the London Stock Exchange (LSE), its listing on domestic markets is an opportunity to create liquidity and deepen the markets,” she said.

Oniha noted that the huge patronage enjoyed by the bond showed the significant level of confidence investors have on the Nigerian economy.

On the $3 billion bonds, the DMO DG said they were in two tranches of 10 years and 30 years respectively. According to her, while the $1.5 billion Bond maturing November 28, 2027 has a coupon rate of 6.5 per cent, the $1.5 billion Bond maturing November 28, 2047 has a coupon rate of 7.625 per cent.

“The offering represents the largest ever single offering from a sub-Saharan issuer, the largest ever order book for a sub-Saharan issuer and the longest tenor bond for a sub-Sahara issuer apart from South Africa. This, again, showed that investors have confidence in the government and future of the country’s economy,” she said.


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