28 Sep

Daily Watch – FG to turn back on 90 bodies, Nigeria partakes of global Sukuk excitement

  • Nigeria’s debut ₦100 billion sovereign Sukuk issue launched last week was more than 5.8 percent oversubscribed, the Debt Management Office said on Wednesday, suggesting it may tap this demand more to help fund its budget. Nigeria has a growing consumer and corporate banking sectors and is home to the largest Islamic population in sub-Saharan Africa, with Muslims accounting for about half of its population of 180 million. “With the success of the (Sukuk) offer, another window has been opened for the government to raise funds to close Nigeria’s infrastructure gap,” the debt office (DMO) said in a statement. The seven-year Islamic bond, which is structured as a lease and guaranteed by the government, fetched ₦105.87 billion in bids from retail and institutional investors, the DMO said. The proceeds of the bond would be used to construct and maintain roads. The debt, which it had originally expected to sell in June via a book-building process, will yield a 16.47 percent rental rate, payable semi-annually. The sale ended on 22 September.
  • Nigeria may have to grapple with the payment of $11.62 billion in foreign debt within in the next 10 years, the latest Debt Management Office projections show. The debt service payment over the 10-year period spanning from 2017 to 2026 includes some principals that will fall due for redemption as well as interests that would have accumulated and redeemed on an annual basis. Accordingly, 2018, 2021 and 2023 will see Nigeria parting with more than $1 billion each year because some Eurobonds issued by the Federal Government will fall due for redemption then. In 2018, the country will repay $1.19 billion, including a principal redemption of $716.09 million and interest payment of $475.8 million. The country will also pay $1.58 billion in 2021 with a principal redemption of $1.12 billion and interest payment of $440.59 million. By 2023, the country will have to part with $1.69 billion. Apart from the three years highlighted by the DMO, the country will also part with a significant amount of money in debt servicing in the 10-year period.
  • The FG says it has begun the process of terminating its membership of 90 international organisations, almost a third of the 310 organisations it belongs to. The decision is coming after accumulating a backlog of $120 million in membership dues and other financial commitments which costs the nation on average $70 million annually. Finance minister, Kemi Adeosun, made the disclosure while briefing State House correspondents at the end of the weekly Federal Executive Council meeting. Adeosun, who briefed journalists alongside Foreign Affairs minister, Geoffrey Onyeama said the cabinet considered the report of an inter-ministerial committee which made the recommendations. Although she did not name the organisations which Nigeria would be walking out of, Adeosun said the committee was given two weeks within which to review the recommendations after which a final decision would be taken by FEC.
  • The House of Representatives has given SEC two weeks to disclose the results of its investigation into oil firm Oando, said the deputy chairman of its capital markets committee, Tony Nwulu. The SEC said in July it was investigating Oando’s shareholding structure following its $1.65 billion acquisition of ConocoPhillips’s Nigerian business in 2014. A company source told Reuters earlier this month the investigation centred on the ownership of some Oando shares bought through an investment vehicle at the time of the ConocoPhillips deal. The SEC has yet to publish its findings though it allowed the company to proceed with its annual shareholder meeting this month. Oando Chief Executive Adewale Tinubu told shareholders this month that the SEC allowed the meeting to proceed as the company had disclosed the relevant information to the regulator. Shares in Oando, which are also listed in Johannesburg and Toronto, have fallen 38.3 percent this year after hitting a peak in May. It recovered slightly from a five-month low it touched last week.
  • Nigeria raised ₦243.7 billion at a bond auction on Wednesday, almost double the amount on offer, as local funds and foreign investors piled into longer tenors to lock in yields, traders said. The Debt Management Office (DMO) put ₦135 billion worth of bonds maturing in 2021, 2027 and 2037, on offer. However, total investor demand stood at ₦394.8 billion, prompting the debt office to increase the size of the offer.