Nigeria to Sell Up to $3 Billion Eurobonds to Replace Bills

LAGOS (Capital Markets in Africa) – Nigeria plans to sell as much as $3 billion of foreign-currency bonds to replace naira debt, according to its finance minister.

The government will issue the dollar securities once the National Assembly approves the sale, Kemi Adeosun told reporters Wednesday in Abuja, the capital. They will have three-year maturities and be used to refinance treasury bills as they mature, she said.

“We will borrow less in naira and more in foreign currency because it is cheaper and also because we want to prevent crowding out of the private sector,” said Adeosun, a former investment banker in Nigeria. “The average rate at which we borrow internationally doesn’t exceed 7 percent, whereas our Treasury bills, we are paying between 13.6 percent and 18.5 percent. So we are almost halving the cost of borrowing to try and relieve this pressure on debt service.”

Nigeria has issued $1.8 billion of Eurobonds this year, including a $1 billion deal in February that was increased by $500 million a month later. The yield on those notes, which are due in 2032, rose 5 basis points to 6.76 percent by the close in Lagos, the main commercial hub. Nigeria’s local-currency debt has an average yield of 16.51 percent, according to data compiled by Bloomberg.

Nigeria, hit by the 2014 oil-price crash, is battling its worst economic crisis in around 30 years. Its debt service costs have risen as it boosts spending on infrastructure to counter the slump.