By Merit Ibe
The Federal Government of Nigeria, through the Debt Management Office (DMO), has launched a $500 million bond to local and foreign investors.
At the unveiling yesterday in Lagos, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, stated that he was pleased to have introduced to the investing public as well as other stakeholders the domestic issuance of federal government us dollar bond aimed at increasing the flow of dollars into the economy.”
The $500 million domestic bond, will be accessible to a broad range of investors. The minimum investment amount is set at $10,000, with additional investments allowed in increments of $1,000. This structure is intended to enable wider participation among investors, both within Nigeria and the diaspora.
Edun noted that the $500m domestic bond is a transformational transaction in many ways.
“We are here today to discuss dollar funding, which is critical for the exchange rate and essential for stabilising investment and the economy. The Central Bank has adopted the ‘willing buyer, willing seller’ model, which has proven efficient and has contributed to the influx of additional dollars.
“The flow of dollars into the economy has improved through portfolio investors, foreign direct investors, and multilateral organisations that have supported the President’s macroeconomic policies. Today, we are playing a significant role in this process with the domestic issuance of US dollar bonds.”
Edun noted that the bond issuance is more than just a financial instrument; “it is a strategic move to channel funds into sectors that will catalyse economic growth.”
The minister said under President Bola Tinubu, the macroeconomic reforms have not only taken some major bold and courageous steps aimed at stabilizing the economy, but also have paved the way for innovation, for creativity and for imagination amongst all economic actors, including in the financial markets.
He was optimistic that the historic dollar bond, will provide much needed foreign exchange liquidity, “a boost to the reserves that in itself will help to stabilize the exchange rate, help to manage inflation and eventually bring down interest rates, create the basis for investment by domestic investors and in particular foreign direct investors.”
“We already have quite a large flow of foreign portfolio investment and this will add to it in terms of the liquidity management and even the risk management.”
For Temi Popoola, Chief executive officer, NGX, the domestic issue on the short term perspective, is expected to help the reserves, this will help the level of dollar liquidity in the system.
“It will enhance confidence in the Nigerian economy, both in financial and capital markets.
“In the long term, we will start to see a picture where Nigerians are solving Nigerian problems with Nigerian local capital, as it were.
“Now, of course, as you know, the sort of industries that we do as a financial market infrastructure company, once you have this sort of bigger picture, top down macro picture, as positive as it is, all that then triggers goes through this bond to be listed on one of our exchanges, the NGX Limited.
We also expect that it will have knock on effect on several other portfolio companies that we have.
“We expect knock on effect on dollar product derivatives.”
On his part, Gbadebo Adenrele, managing director of United Capital, said, one of the key aspects of this bond issuance is that it will be listed on platforms such as the Nigerian Exchange and FMDQ, making it accessible to a variety of investors.
“The principal will be repaid after five years, with interest payments made every six months. This structured repayment schedule is designed to provide confidence to investors.”