Re: USA Africa Dialogue Series - STAR INFO: Nigeria's de but Eurobond heavily (2.5 times) oversubscribed {Re UN-STAR =?windows-1252?Q?INFO=3A_Nigeria_oil_fund_fears_hit_bond_issue=2E=2E=2E=2E=2EIntrigu

Bolaji:

The most important factor weighing in Nigeria's favor--and
the reason foreign investors have snapped up all the available
coupons in the Euro Bond debt float--is the fact that Nigeria
is too important geopolitically to the West to be allowed to fail.

Even if Nigeria is failing (which it is gradually) and is at the
precipice of virtual bankruptcy (which it is not), she will be bailed
out by the rich western nations led by the USA and the UK.

So, notwithstanding our current political and socioeconomic
difficulties, some in the west still perceive Nigeria as a good place
to invest.

Which other country in West Africa (even  Africa) can fulfill the numerous
roles Nigeia plays in our immediate geopolitical zone?

Which other nation will police West Africa on behalf of the USA and other nations?

Which other country will lead the invasion of Cote de Ivorie when the time
comes to kick out Laurent Gbagbo and his illegal regime?

Which other country in the world apart from Canada has participated more in international
peace keeping missions in terms of troop commitments than Nigeria?

Take all the above and add the following other positive factors weighing in Nigeria's favor:

a) a large youthful population, which if properly educated and put to good use
might rise to become a huge and productive middle class, whose consuming habits
will propel both domestic production and imports.

b) natural resources--which go far beyond crude oil

c) good weather and geography

d) unexploited or under exploited opportunities in the areas of tourism, food preservation.mechanized
agriculture,

e) the anticipated rapid growth in Nigeria's economy as soon as the electrical power shortage is ameliorated.

Thus if the rest of the world are jumping at the opportunity to buy Nigeria's debt issues, we must look
at  the underlying reasons why they are doing so.

Could it be (after taking all factors into consideration) that Nigeria is not as bad as her citizens portray her?

Give Nigeria the juice--enough electrical power--and watch her soar!


Bye,

Ola

-----Original Message-----
From: Mobolaji ALUKO <alukome@gmail.com>
To: USAAfrica Dialogue <USAAfricaDialogue@googlegroups.com>; NaijaPolitics e-Group <NaijaPolitics@yahoogroups.com>; OmoOdua <OmoOdua@yahoogroups.com>; ekiti ekitigroups <ekitipanupo@yahoogroups.com>; nigerianid@yahoogroups.com <nigerianID@yahoogroups.com>; naijaintellects <naijaintellects@googlegroups.com>
Sent: Sat, Jan 22, 2011 3:33 pm
Subject: USA Africa Dialogue Series - STAR INFO: Nigeria's de but Eurobond heavily (2.5 times) oversubscribed {Re UN-STAR =?windows-1252?Q?INFO=3A_Nigeria_oil_fund_fears_hit_bond_issue=2E=2E=2E=2E=2EIntrigu

 

Dear All:

 

It looks as if in the financial world, you can be pregnant and not be pregnant at the same time.

 

We shall see.....we  need to have a list of the investors posted up for all to see - turst but verify.

 

And there you have it.

 

 

 

Bolaji Aluko

 

____

 

REUTERS

 

UPDATE 5-Nigeria's debut Eurobond heavily oversubscribed

 

Fri Jan 21, 2011 3:15pm EST

* Issue oversubscribed, priced at 7.0 pct yield

* Debt ratios low, growth robust

* Fall in foreign reserves worries some investors

(Adds comment from finance minister)

By Nick Tattersall and Chijioke Ohuocha

LAGOS, Jan 21 (Reuters) - Nigeria issued a $500 million debut Eurobond on Friday with a 7.0 percent yield in a deal that was heavily oversubscribed, as appetite for high-yielding assets outweighed concern about its depleted oil savings.

Investors from 18 countries spanning Europe, the United States, Asia and Africa took up the offer, which was 2.5 times oversubscribed, Finance Minister Olusegun Aganga said.

"This transaction clearly puts Nigeria on the global map. We now have a transparent and internationally observable benchmark against which international investors can accurately price risk," Aganga said, forecasting a rise in foreign investment into sub-Saharan Africa's second-biggest economy.

The successful issue by Africa's top oil exporter, months ahead of elections, could reassure others on the continent of the strength of demand for African debt, convincing them to press ahead with similar but delayed plans. [ID:nLDE70H0L3]

The 10-year bond was priced in line with Nigeria's 7.0 percent guidance and will pay a 6.75 percent coupon, with settlement on Jan. 28, Thomson Reuters news service IFR said.

The pricing means investors demanded a premium to West African peer Ghana, whose 8.5 percent Eurobond due 2017 GH032376037=RRPS is currently yielding around 6.2 percent.

While demand for high-yielding assets, the paucity of West African credit and the relatively low volume of the issue had been expected to fuel appetite, some potential investors were put off by the rapid depletion in Nigeria's oil savings.

Fitch assigned the issue a 'BB-' rating on Friday, saying low debt ratios and robust growth played in Nigeria's favour, but also noting concern about a decline in reserves last year despite a rise in oil prices and production.

"Reserves have risen around $1 billion since the end of 2010, but in the absence of fundamental institutional reforms on the usage of oil revenues and savings, this gradual build-up is unlikely to be sustained," Fitch said.

Standard & Poors has assigned a 'B+' long-term senior unsecured debt rating to the issue.

_____

 

Nigeria Eurobond 2.5 times oversubscribed -source

Fri, Jan 21 2011

LAGOS, Jan 21 (Reuters) - Nigeria $500 million debut Eurobond was 2.5 times oversubscribed, a source close to the deal told Reuters on Friday.

The 10-year paper was priced with a yield of 7.0 percent and a coupon rate of 6.75 percent. (For more Reuters Africa coverage and to have your say on the top issues, visit: af.reuters.com/ ) (Reporting by Chijioke Ohuocha; Writing by Nick Tattersall)

 

__________________

---------- Forwarded message ----------
From: Mobolaji ALUKO <alukome@gmail.com>
Date: Sat, Jan 22, 2011 at 8:10 AM
Subject: UN-STAR INFO: Nigeria oil fund fears hit bond issue.....Intrigue surrounds oil windfalls...as Demand falls for Nigeria's debt
To: USAAfrica Dialogue <USAAfricaDialogue@googlegroups.com>, NaijaPolitics e-Group <NaijaPolitics@yahoogroups.com>, OmoOdua <OmoOdua@yahoogroups.com>, ekiti ekitigroups <ekitipanupo@yahoogroups.com>, "nigerianid@yahoogroups.com" <nigerianID@yahoogroups.com>, naijaintellects <naijaintellects@googlegroups.com>

 

________________________________________________________________________________________________________________________________

 

                                               Nigeria's Foreign Exchange Reserves vs. Oil Price (2007-2011)

 

                                                                       

 

_______________________________________________________________________________________________________________________________

 

 

FINANCIAL TIMES

Nigeria oil fund fears hit bond issue

By William Wallis and David Oakley

Published: January 20 2011 22:07 | Last updated: January 20 2011 22:07

Mounting concern about a huge outflow of money from Nigeria's "rainy day" oil fund has prompted some big investors to shun the country's debut international bond issue on Friday.

Nigerian officials said an investor roadshow to market the $500m bond issue had generated considerable appetite among international investors.

However, several major funds have told the Financial Times they are not interested in the deal because of Nigeria's deteriorating fiscal situation and worries about how President Goodluck Jonathan's government has run the excess crude account, designed to store up windfall oil revenues.

The account was set up under former President Olusegun Obasanjo, who stood down following 2007 elections. At that time there was $20bn in the fund. But as recently as last September there was less than $400m, according to public disclosures, which showed billions flowing out of the account last year.

To deflect questions about the constitutionality of the fund, the federal government struck a deal in 2007 to divide oil windfalls between national, state and local governments.

Since then, more than $30bn of revenues – calculated on the difference between the budgeted and market price of oil – has flowed out of the account, according to donor and government officials. The funds went partly in regular payments to state governors over which there was little subsequent oversight, and partly in federal spending on infrastructure.

"The fact they have run down the excess crude account is very worrying," said Antoon de Kler at Investec based in Cape Town, adding that "it is unclear where the money is going".

"Why does a country that relies for 90 per cent of its income on oil, which has seen a big rise in price, need to run down its foreign exchange reserves? For these reasons we are not buying the bond."

Other big international investment funds, which invest in Africa, also told the FT they would not participate in the sale. Some Nigerian politicians and officials have questioned why foreign reserves have not risen, and the excess crude account did not grow during the past year of rising oil prices.

Revenues from oil sales go direct to the Nigerian National Petroleum Corporation, the state oil company, before reaching the central bank.

Technocrats in Mr Jonathan's administration say Nigeria would have earned nearly $16bn in windfall revenues in 2010, based on production of 750m barrels of oil with average oil prices $21 higher than the $60 budgeted.

Not all of that would have returned to government because of its joint ventures with international oil companies. Olusegun Aganga, finance minister, told the FT that Nigeria spent heavily on oil production last year and on clearing arrears to oil companies.on top of these costs. The government had also partly financed the budget deficit out of the excess crude account to reduce domestic borrowing, he said

____________________________________________________________________________________________________________________________

 

FINANCIAL TIMES

Intrigue surrounds oil windfalls

By William Wallis in London

Published: January 20 2011 22:07 | Last updated: January 20 2011 22:25

The way Nigeria manages windfall revenues when oil prices soar has been a continuous source of friction and intrigue since the days of military rule.

The excess crude account (ECA), which has surfaced as an issue for investors as Nigeria makes its debut on international bond markets, was one of the more controversial financial innovations of the elected government of Olusegun Obasanjo, who stood down in 2007.

The fund, into which surpluses from crude exports above the budgeted price of oil are supposed to accumulate, was set up two years earlier to reduce Nigeria's historical vulnerability to swings in the world oil price, on which the country depends typically for more than 80 per cent of earnings. At the time, the government was setting about clearing its $33bn external debt, marking a transformation from financial basket case to budding frontier market.

But the special account stirred political tensions because legally under the federal constitution the revenues should be split between the federal, state and local governments. Mr Obasanjo, a stubborn former general, found ways to contain pressure to disburse the money, and the account began to fill up as oil prices soared.

By the time he left office in 2007 there was $20bn in the ECA, part of total foreign reserves over $60bn.

However, his more emollient successor, the late Umaru Yar'Adua, who rose to the top having served as a state governor, applied the letter of the law, acceding to demands that the federal government divvy up the funds.

In the nearly four years since, more than $30bn has flowed out of the account, with about $7bn alone last year, according to officials and analysts.

The problem is that no one in government has been either willing or able to put a finger on exactly how much has gone in and out of the account, now close to empty, according to a senior official, and how exactly it has been spent.

 

______________

 

FINANCIAL TIMES

Demand falls for Nigeria's debt

By David Oakley

Published: January 20 2011 22:07 | Last updated: January 20 2011 22:07

Investors have long forecast the potential of Nigeria because of its oil wealth, size and growing private sector.

Jim O'Neill, the head of Goldman Sachs Asset Management, included the country in his N11, or next 11, emerging market countries to watch after the Brics – Brazil, Russia, India and China – because of its potential.

But the country has lost some of its lustre for investors, as worries have increased over its fiscal prudence and falling foreign exchange reserves.

That explains why Nigeria's first sovereign bond issue has not seen the strong demand that it might have attracted even a few months ago, they say.

Bankers expect to set a cost of borrowing for 10-year bonds, which will be priced on Friday, at about 7 per cent, higher than comparable debt of other sub-Saharan countries. The 10-year bonds of Gabon and Ghana are currently trading at 5.5 per cent and 6.3 per cent respectively.

One investor said: "We met the Nigerians and we were not very impressed. We have seen too much fiscal slippage. The lack of transparency in Nigeria's finances is a problem. We are not buyers of this deal."

Other investors cite potentially destabilising presidential elections in April as another reason to stay on the sidelines.

Bankers insist the deal will still attract the targeted $500m. The growth of the private sector, banking reforms and the fact the country is rich in resources still make its debt attractive to some investors.

Others say the yields of 7 per cent also make it a worthwhile investment. One said: "This is not German or US debt. People who want to buy into Nigeria realise this. It is still rated junk and is not risk free." Nigeria is rated B+ by Standard & Poor's, four levels below investment grade.

____________________________________________________________________________________________________________________

FINANCIAL TIMES

Beyondbrics

Nigeria: oil fund turns investors skittish

January 20, 2011 10:05 pm by Shannon Bond

Last fall it seemed investors were clamouring for Nigeria's $500m eurobond issue – but worries over the country's fiscal situation are sapping that enthusiasm, according to a report in Friday's FT by William Wallis and David Oakley:

Several major funds have told the Financial Times they are not interested in the deal because of Nigeria's deteriorating fiscal situation and worries about how President Goodluck Jonathan's government has run the excess crude account, designed to store up windfall oil revenues.

The account was set up under former President Olusegun Obasanjo, who stood down following 2007 elections. At that time there was $20bn in the fund. But as recently as last September there was less than $400m, according to public disclosures, which showed billions flowing out of the account last year.

As one South Africa-based analyst explains,

The fact they have run down the excess crude account is very worrying . . . it is unclear where the money is going.

Why does a country that relies for 90 per cent of its income on oil, which has seen a big rise in price, need to run down its foreign exchange reserves? For these reasons we are not buying the bond.

___________________________________________________________________________________________________________________

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