Nigeria is set to launch its first-ever domestic dollar bond, valued at $500 million, which would be a huge step forward for the nation’s financial situation. This development comes as the National Bureau of Statistics (NBS) is scheduled to release its report on capital importation for the second quarter (Q2) of 2024. The issuance of this bond, along with the forthcoming economic data, demonstrates Nigeria’s ongoing efforts to attract investment and stabilize its economy in the face of several obstacles.
Bond Auction to Attract Global Investors
The Debt Management Office (DMO) will oversee the auction of Series 1 of the Federal Government of Nigeria (FGN) US dollar bond, which is expected to generate substantial interest from both local and international investors. The bond has a minimum investment threshold set at $10,000, with additional investments allowed in increments of $1,000, aiming to appeal to a broad range of investors, including those within the Nigerian diaspora.
Wale Edun, Nigeria’s Minister of Finance and the Coordinating Minister of the Economy, emphasized the strategic importance of this bond issuance during a recent roadshow in Lagos. Edun stated that the bond is not just a financial instrument but also a crucial step toward channeling funds into sectors that will drive economic growth. This bond, he argued, represents an opportunity for investors to contribute to Nigeria’s development while earning competitive returns.
The bond will be listed on multiple platforms, including the Nigerian Exchange and FMDQ, making it accessible to a diverse pool of investors. The principal will be repaid after five years, with interest payments distributed semi-annually, which aims to build investor confidence through a structured repayment schedule.
DMO’s Local Bond Auction Continues
Simultaneously, the DMO is set to auction N190 billion in FGN bonds to raise funds for the government. The auction will include the reopening of a five-year N70 billion bond, alongside reopenings of seven- and nine-year bonds, valued at N70 billion and N50 billion, respectively.
In the previous auction held in July, the DMO sold N378 billion across three bonds, with the longest tenure achieving a stop rate of 20.45%. The most recent auction saw even more robust demand, particularly for the long-dated nine-year bond, which attracted an oversubscription of N241.65 billion—double the amount initially offered.
Olaolu Boboye, a lead economist at CardinalStone Securities Limited, noted that the market’s preference for long-term bonds reflects investors’ search for higher yields in a volatile financial landscape. Boboye highlighted that the yield on the nine-year bond increased to 21.98% at the most recent auction, up from 21.50% in July. The five- and seven-year bonds also saw their stop rates rise, indicating growing demand and investor confidence in longer-term instruments despite the risks involved.
NBS to Release Key Economic Report
The National Bureau of Statistics is expected to release several important economic reports in the coming days, starting with the price watch for diesel and premium motor spirit (PMS) on Monday. These reports are anticipated to provide insight into Nigeria’s inflationary trends, particularly in the energy sector, which has seen significant price fluctuations in recent months.
In June 2024, the average retail price for petrol rose by 37.44% year-on-year to N750.17 per liter, compared to N545.83 per liter in June 2023. Diesel prices also surged, with consumers paying an average of N1,462.98 per liter, a 79.32% increase from N815.83 per liter in the corresponding month of the previous year. However, with the Dangote refinery—the world’s largest single-train facility—now ramping up production, there is optimism that the price of diesel could decrease to about N900 per liter, easing the financial burden on consumers and reducing long queues at filling stations.
The NBS is also scheduled to publish its report on selected food prices for July, which is expected to shed light on the state of food inflation in the country. Although food inflation decreased to 39.53% in July from 40.87% in June, it remains significantly higher than the 26.98% recorded in July 2023. The report attributes the year-on-year rise in food inflation to increases in the prices of staples such as Semovita, Yam Flour, and Wheat Flour, among others.
Capital Importation Report Anticipated
The NBS will publish its eagerly awaited Q2 2024 capital imports data on Friday. A thorough examination of foreign investment inflows into Nigeria will be included in the report, serving as a vital indicator of investor confidence in the economy of the nation.
In the first quarter of 2024, total capital importation into Nigeria surged to a four-year high of $3.38 billion, representing a 198.06% increase from the $1.13 billion recorded in Q1 2023. This substantial rise was driven primarily by portfolio investments, which accounted for 61.48% of the total, followed by other investments at 34.99%. However, foreign direct investment (FDI) remained relatively low, contributing only 3.53% of the total capital importation.
The Q2 report is anticipated by analysts to demonstrate a sustained rise in capital importation, driven by elevated interest rates and the recent stability of the foreign currency market. Nigeria needs the inflow of foreign money in order to restore its economy and draw in long-term investments.
Naira Gains as Dollar Supply Increases
In a related development, the supply of dollars has increased, supporting the Nigerian naira’s recovery. On Thursday, the naira saw a 1.38% increase in value on the official foreign currency market. The dollar was valued at N1,564.48, down from N1,586.04 the day before.
The market participants’ 61.54% increase in the dollar supply, which went from $92.39 million on Wednesday to $149.25 million on Thursday, is partially responsible for the naira’s surge in value. The dollar closed at N1,595, down from N1,600 on Wednesday, and the naira gained N5 at the parallel market, also referred to as the black market.
Financial experts remain cautiously optimistic about the naira’s prospects, as the Central Bank of Nigeria (CBN) continues its interventions in the foreign exchange market. The CBN’s efforts, together with a more stable economic environment, are expected to sustain the recent gains in the naira’s value, providing a much-needed boost to the economy.
