"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", said an international investor...But they eventually bought them, but on very harsh terms for Nigeria.
According to the Financial Times, Nigeria's debut international bond issue saw strong demand from investors in spite of worries over its depleted oil savings.
The country, which has been at the centre of controversy over its fund to gather windfall oil revenues, sold $500m to investors.
Olusegun Aganga, Nigeria's finance minister, said the issue was more than twice oversubscribed. "It is a debut bond, it shows we have met with international standards getting the deal to market. It means our corporates can access longer-term funds and it reinforces our position as an economic and political leader in Africa," he said.
Mr Aganga said some of the world's biggest investment funds from 18 different countries subscribed to the bond issue. However, some of the world's biggest fund managers told the Financial Times earlier they would not buy the bonds because of Nigeria's deteriorating public finances.
Concerns over a huge outflow of money from Nigeria's "rainy day" oil fund, known as the excess crude account (ECA), forced the government to pay investors higher yields than would otherwise have been expected, investors said.
Financial Times had earlier reported that 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.
the Financial Times had said several major funds determined 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.
One investor said: "Ordinarily we would have bought this bond as Africa is a coming market in our view, with potential for strong returns. But we were not impressed by the Nigerians."
The 10-year bond priced with yields of 7 per cent, higher than other similar bonds from other sub-Saharan nations. Gabon and Ghana 10-year bonds trade at 5.8 per cent and 6.2 per cent respectively.
Mr Aganga said the pricing was a good result and that if Ghana launched a bond in today's market it could expect to pay more than 7 per cent.
Nigerian officials and bankers managing the 10-year bond deal insisted that there was considerable appetite for the bonds. Bankers said order books or demand rose to about $1bn.
But worries about how President Goodluck Jonathan's government has run the excess crude account – into which surpluses from crude exports above the budgeted price of oil are supposed to accumulate – marred what has been an eagerly awaited bond issue.
Many investors had expected Nigeria, Africa's most populous country, to issue bonds as long ago as 2008. The financial crisis and drop in oil prices delayed the deal, the fourth international sovereign bond from a sub-Saharan nation, excluding South Africa.
In spite of the problems, Nigeria remains an attractive investment because of its large oil reserves, growing private sector and banking reforms. It is also only the fourth sub-Saharan country, excluding South Africa, to issue debt. This scarcity helps attract demand.
On 07 December 2010, I wrote that Nigeria is depleting its foreign currency reserves to defend the naira and running down oil savings before elections next year, damping investor confidence. International observers fear that as the government prepares its first global bond sale, the sale will be under-valued.
Then as the international bond sales got under way today I wrote again this morning that "As Nigeria goes ahead with first sale of international bonds which pay interest in US dollars for the first time today, concerns over Nigerian government finances may keep some investors away. Africa's most populous nation plans to raise $500 million from bondholders to help Nigerian companies tap the market. "We sounded the warning that "President Jonathan's reckless spending may scare away investors"!
But today Investors stressed that yields of 7 per cent were an attractive return for a country that was likely to remain on a stable financial footing, given that oil prices were rising.
They point out that Nigerian bonds are not a safe investment like German bonds, which is why the yield premium is much higher than in these developed economies.
Nigeria's ECA has dwindled by more than $30bn in the past four years – about $7bn last year alone – according to officials and analysts. It now stands at less than $1bn, they say.
Foreign reserves, of which the ECA is a part, inched up month by month to $33.5bn by mid-January but are still down more than a quarter on year-ago levels.
Nigeria has shrugged off the concerns, saying the spending was needed to defend the currency against increased dollar demand, fund projects in the power sector, and provide seed funding for a planned sovereign wealth fund, which should have a firmer legal basis than the ECA for safeguarding oil savings.
The special account has stirred political tensions because under the federal constitution the revenues should be split between the federal, state and local governments.
While Olusegun Aganga may gloat on the seeming success of his "debut bond", he should be reminded that Gabon's 2017 foreign bond is currently yielding 5.2% while Ghana's 2017 foreign bond is yielding approximately 6.17%. Nigeria has a better credit rating than both nations at B+ and it is much bigger economy than Gabon and Ghana. Yet our Eurobond yields at a higher 7%.
The amount being raised, $500 million, a relatively small sum for US and Europe's investment banks. Last month, Citigroup CEO Mr. Vikram Pandit while on a visit to Nigeria said that he expected the bond to be snapped up in very little time.
http://elombah.com/index.php?option=com_content&view=article&id=5022:nigeria-eurobond-sales-over-subscribed&catid=52:daniel-elombah&Itemid=73Daniel Elombah
Publisher: www.elombah.com
Publisher: www.elombah.com
(A Nigerian Perspective on world affairs)
+44-7958588018
"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."...But they eventually bought them, only on very harsh terms for Nigeria.
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, January 22, 2011 10:10:53 PM
Subject: [Naijaintellects] Re: STAR INFO: Nigeria's debut Eurobond heavily (2.5 tim es) oversubscribed {Re UN-STAR INFO: Nigeria oil fund fears hit bond issue.....Intrigue surrounds oil w
My friend:
Why not the full list?
Okay, partial list nko? What about Full List, not by name but categorized only by country or continent? Or by number indexed on the brackets of money invested?
It is this unnecessary amount of secrecy about investments that partially caused the world's financial markets to collapse, is it not?
Do get us one of the above lists, to re-assure us that it is either FT or FGN that is/is not telling the whole truth.
Oya, biko!
Bolaji Aluko
On Sat, Jan 22, 2011 at 4:25 PM, <....@aol.com> wrote:
Prof, you can not see the full list of investors for the Nigerian bond. Thats not the practice in the industry and has nothing to do with financial transparency. Nigeria knew that when it signed up for the offering. It was oversubscribed and its as simple as that.
-----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 2:33 pm
Subject: NigerianID | STAR INFO: Nigeria's debut Eurobond heavily (2.5 tim es) oversubscribed {Re UN-STAR INFO: Nigeria oil fund fears =?windows-1252?Q?hit_bond_issue=2E=2E=2E=2E=2EIntrigue_surrounds_oil_wi
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____REUTERSUPDATE 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 OhuochaLAGOS, 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 2011LAGOS, 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 TIMESNigeria oil fund fears hit bond issue
By William Wallis and David OakleyPublished: January 20 2011 22:07 | Last updated: January 20 2011 22:07Mounting 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 TIMESIntrigue surrounds oil windfalls
By William Wallis in LondonPublished: January 20 2011 22:07 | Last updated: January 20 2011 22:25The 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 TIMESDemand falls for Nigeria's debt
By David OakleyPublished: January 20 2011 22:07 | Last updated: January 20 2011 22:07Investors 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 TIMESBeyondbricsNigeria: oil fund turns investors skittish
January 20, 2011 10:05 pm by Shannon BondLast 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.___________________________________________________________________________________________________________________
__._,_.___See event pictures and info of the NIDO Canada World Conference, Ottawa 2010 at http://www.AfriCanVIP.com
SEE YOU IN TORONTO IN 2011
Nigerians In Diaspora Organization. Our mission is to promote the spirit of patriotism, networking, and cooperation among Nigerians in Diaspora....
Support the PUSH TO VOTE IN NIGERIA at http://www.ProudNigerians.Org
.
__,_._,___
--
You received this message because you are subscribed to the Google Groups "naijaintellects" group.
To post to this group, send email to naijaintellects@googlegroups.com.
To unsubscribe from this group, send email to naijaintellects+unsubscribe@googlegroups.com.
For more options, visit this group at http://groups.google.com/group/naijaintellects?hl=en.
No comments:
Post a Comment