Nigeria, Others Plan Record Bond Sales as Yields Sink

21 Dec 2012

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Obinna Chima with agency report

Nigeria, Angola and Ghana are preparing to sell as much as $3.75 billion in international bonds in 2013, the most from the continent ever, after yields sank below Italy and Spain and investors set aside concerns sparked by the Cote D’Ivoire’s default almost two years ago.
According to Bloomberg, Nigeria planned to borrow $1 billion on overseas markets, twice as much as it sold in 2011, while Angola is seeking $2 billion of debt. Also, Ghana, which issued the first Eurobonds in sub- Saharan Africa outside of South Africa in 2007, may sell a further $750 million, the country’s Deputy Finance Minister, Seth Terkper.

As the World Bank estimated, Africa needs $93 billion a year to overcome poor road networks and shortages of power and water and governments are taking advantage of historic-low yields across emerging markets.

Yields on Nigeria’s dollar bonds due January 2021 dropped 199 basis points this year to 4.12 percent, while similar-maturity debt sold by Spain yields 5.25 percent and that for Italy 4.4 percent. Cote D’Ivoire, which defaulted on $2.3 billion of bonds in January 2011, rewarded investors with the world’s best returns.

London-based Analyst at FM Capital Partners Limited, Kojo Amoo-Gottfried, said: “Given their inherent financing needs and the lack of capital, it would be beneficial for African issuers to access cheap financing while it is available. Conducive market conditions will not persist indefinitely.”

Average emerging-market dollar-denominated bond yields have fallen 85 basis points, or 0.85 percentage point, this year to a record 5.57 per cent, according to JPMorgan Chase & Co.’s EMBI Global Index.

The International Monetary Fund (IMF) estimated that developing nations would post growth rates next year almost four times faster than the developed world. Even with the declines, average yields compare with 1.8 percent on 10-year United States Treasuries, luring investors seeking higher returns.

Africa’s Gross Domestic Product will expand 5.7 per cent in 2013, the fastest pace after developing nations in Asia, from five percent this year, the IMF had said.
A Senior Analyst at Moody’s Investors Service, Aurelien Mali, said investors were looking to tap into “a good growth story.”

Nigeria’s inflation rate has stayed above the central bank’s 10 percent target this year, with price growth accelerating 12.3 percent in November. Nigeria also relies on crude exports for about 95 per cent of foreign-currency earnings and 80 per cent of government revenue.

President Goodluck Jonathan had in his budget speech in October said that the country would sell its second Eurobond in 2013.
Mali also explained that investors were favouring African dollar bonds because they are scarce.

Tags: Business, Nigeria, Featured, RECORD, Sales, Sink

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