Economy
FG to Sell $2.5b Eurobond in October to Fund 2017 Budget
By Modupe Gbadeyanka
Next month, Nigeria plans to sell $2.5 billion Eurobond and proceeds from the sale would be used to fund the 2017 budget, Bloomberg reports.
Also, after the October Eurobond sale, the Federal Government will issue another $3 billion Eurobond before the end of the year, the reputable media outfit added.
This would bring to $7 billion the country has sold this year alone.
Here is the Bloomberg report
Nigeria plans to sell as much as $5.5 billion of Eurobonds in the next three months to fund capital projects and replace local-currency debt, according to the Debt Management Office. Yields on existing bonds rose to the highest in two months.
The new offers would bring the amount raised through Eurobond sales by Africa’s most-populous nation this year to more than $7 billion as President Muhammadu Buhari’s administration restructures its debt portfolio to almost double the portion of foreign borrowing in a bid to reduce financing costs.
The government wants to raise $2.5 billion in October to help fund 2017’s 7.4 trillion-naira ($20.8 billion) budget, the biggest yet, DMO Director-General Patience Oniha said on Wednesday in an interview in the capital, Abuja. It will sell the remaining $3 billion before the end of the year to replace naira-denominated debt, she said.
The government’s advisers “have told us the market is waiting,” Oniha said. “Work is already ongoing and we are just waiting for a resolution from the National Assembly to proceed.”
The yield on Nigeria’s $500 million of Eurobonds due July 2023 rose four basis points by 1:26 p.m. in London, extending Wednesday’s 15 basis-point climb, to 5.49 percent, the highest since Aug. 21. That on the nation’s dollar securities due in 2032 increased six basis points to 6.91 percent, the highest since July 18.
Citigroup Inc. and Standard Chartered Plc, which helped Nigeria sell bonds this year, will be retained as bookrunners for the $2.5 billion, and are in talks with the government to also lead the $3 billion sale, Oniha said.
Increase Proportion
Nigeria’s overall foreign debt, which includes funds from partners and the Export-Import Bank of China, stood at $15.1 billion as of June 30, while domestic debt was 14.1 trillion naira, the National Bureau of Statistics said on Sept. 19. The government wants to increase the proportion of foreign borrowing to 40 percent of total debt stock from under 30 percent currently, Oniha said.
“That will reduce the government’s borrowing costs,” she said. There is an almost 10 percentage-point spread between domestic and foreign borrowing costs and the restructuring debt plan will help save the government hundreds of million dollars in financing costs, Oniha said.
Nigeria’s Eurobonds yield an average 6 percent, compared with about 16 percent for its naira debt, according to Bloomberg indexes
The Monetary Policy Committee on Sept. 26 left its key interest rate at a record high of 14 percent, where it’s been for more than a year, to fight inflation that’s almost double the target and maintain hard-won stability in exchange rates, Governor Godwin Emefiele said. In the second quarter, the economy emerged from a 2016 slump, the deepest in more than a quarter of a century, with gross domestic product rising 0.6 percent from a year earlier.
High domestic borrowing costs are also forcing the DMO to reduce the maturity of naira debt it plans to sell so that it doesn’t lock in unfavorable interest payments over a longer period, Oniha said. “That will be reflected in our next-quarter calendar for bonds,” Oniha said. The government will instead push for more than 15-year tenure on dollar-denominated securities, she said.
“The good news about this is that Nigeria has the capacity to borrow more from the international capital market given improving fundamentals and its relatively low external debt levels, around 4-5 percent of gross domestic product,” Gaimin Nonyane, the London-based economic-research head at Ecobank International Group, said. “Some of these funds are likely to be used to finance the 2018 maturing debt of $500 million.”
While Nigeria’s debt to GDP ratio is among the lowest in Africa, its interest payments-to-revenue ratio doubled last year to 66 percent of revenue, according to the International Monetary Fund.
The government is looking to plug a 2017 budget deficit that it forecast at 2.3 trillion naira, or 2.2 percent of GDP following a revenue shortfall caused by the decline of output and price of oil, its main export. About one-third of this year’s budget will be invested in new roads, rail, ports and power as part of a wider plan to help the economy recover from a 1.6 percent contraction last year, boost growth to 7 percent, and create 15 million jobs by 2020.
Source: Bloomberg
By Adedapo Adesanya
The Nigerian Exchange (NGX) Limited is seeking review of the controversial Capital Gains Tax increase, fearing it will chase away foreign investors from the country’s capital market.
Nigeria’s new tax regime, which takes effect from January 1, 2026, represents one of the most significant changes to Nigeria’s tax system in recent years.
Under the new rules, the flat 10 per cent Capital Gains Tax rate has been replaced by progressive income tax rates ranging from zero to 30 per cent, depending on an investor’s overall income or profit level while large corporate investors will see the top rate reduced to 25 per cent as part of a wider corporate tax reform.
The chief executive of NGX, Mr Jude Chiemeka, said in a Bloomberg interview in Kigali, Rwanda that there should be a “removal of the capital gains tax completely, or perhaps deferring it for five years.”
According to him, Nigeria, having a higher Capital Gains Tax, will make investors redirect asset allocation to frontier markets and “countries that have less tax.”
“From a capital flow perspective, we should be concerned because all these international portfolio managers that invest across frontier markets will certainly go to where the cost of investing is not so burdensome,” the CEO said, as per Bloomberg. “That is really the angle one will look at it from.”
Meanwhile, the policy has been defended by the chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, who noted that the new tax will make investing in the capital market more attractive by reducing risks, promoting fairness, and simplifying compliance.
He noted that the framework allows investors to deduct legitimate costs such as brokerage fees, regulatory charges, realised capital losses, margin interest, and foreign exchange losses directly tied to investments, thereby ensuring that they are not taxed when operating at a loss.
Mr Oyedele also said the reforms introduced a more inclusive approach to taxation by exempting several categories of investors and transactions.
By Adedapo Adesanya
Food Concepts Plc neutralized the gains recorded by three securities, returning the NASD Over-the-Counter (OTC) Securities Exchange into the negative territory with a 0.27 per cent loss on Thursday, December 4.
Yesterday, the share price of the parent company of Chicken Republic and PieXpress declined by 34 Kobo to sell at N3.15 per unit compared with the previous day’s N3.49 per unit.
This shrank the market capitalisation of the OTC bourse by N5.72 billion to N2.136 billion from N2.142 trillion and weakened the NASD Unlisted Security Index (NSI) by 9.57 points to 3,571.53 points from 3,581.10 points.
Business Post reports that Central Securities Clearing System (CSCS) Plc went down by 50 Kobo to N38.50 per share from N38.00 per share, FrieslandCampina Wamco Nigeria Plc gained 29 Kobo to sell at N55.79 per unit versus N55.50 per unit, and Geo-Fluids Plc added 5 Kobo to close at N4.60 per share compared with Wednesday’s closing price of N4.55 per share.
Trading data indicated that the volume of securities recorded at the session surged by 6,885.3 per cent to 4.3 million units from the 61,570 units posted a day earlier, the value of securities increased by 10,301.7 per cent to N947.2 million from N3.3 million, and the number of deals went up by 146.7 per cent to 37 deals from the 15 deals achieved in the previous trading session.
At the close of business, Infrastructure Credit Guarantee Company (InfraCredit) Plc was the most traded stock by value on a year-to-date basis with the sale of 5.8 billion units for N16.4 billion, trailed by Okitipupa Plc with 170.4 million units worth N8.0 billion, and Air Liquide Plc with 507.5 million units valued at N4.2 billion.
InfraCredit Plc also finished the session as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.
By Dipo Olowookere
The upward trend witnessed at the Nigerian Exchange (NGX) Limited in recent sessions continued on Thursday as it further improved by 0.10 per cent.
This was despite investor sentiment turning bearish after the local equity market ended with 23 price gainers and 28 price gainers, indicating a negative market breadth index.
UAC Nigeria gained 10.00 per cent to finish at N88.00, Morison Industries appreciated by 9.94 per cent to N3.54, Ecobank rose by 8.53 per cent to N36.90, and Coronation Insurance grew by 8.47 per cent to N2.56.
On the flip side, Ellah Lakes depreciated by 10.00 per cent to N13.14, Eunisell Nigeria also shed 10.00 per cent to finish at N72.90, Transcorp Hotels slipped by 9.95 per cent to N157.50, Omatek shrank by 9.23 per cent to N1.18, and Guinea Insurance dipped by 8.46 per cent to N1.19.
Yesterday, the All-Share Index (ASI) went up by 152.28 points to 145,476.15 points from 145,323.87 points and the market capitalisation chalked up N97 billion to finish at N92.726 trillion compared with the previous day’s N92.629 trillion.
Customs Street was bubbling with activities on Thursday, though the trading volume and value slightly went down, according to data.
A total of 1.9 billion stocks worth N19.2 billion exchanged hands in 23,369 deals during the session versus the N2.3 billion valued at N21.0 billion traded in 21,513 deals a day earlier.
This showed that the number of deals increased by 8.63 per cent, the volume of transactions depleted by 17.39 per cent, and the value of trades decreased by 8.57 per cent.
For another trading day, eTranzact led the activity chart with 1.6 billion units sold for N6.4 billion, Fidelity Bank traded 31.0 million units worth N589.3 million, GTCO exchanged 28.3 million units valued at N2.5 billion, Zenith Bank transacted 27.1 million units for N1.6 billion, and Ecobank traded 21.9 million units worth N744.3 million.
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