The Debt Management Office (DMO) may more than double the size of a planned $100 million diaspora bond to tap demand from nationals living outside the continent’s most populous nation to fund projects back home.
The debt office is set to ask lawmakers within two to three weeks for a possible increase to between $200 million and $250 million, Director General Abraham Nwankwo told Bloomberg in an interview on January 15 in the capital, Abuja. The amount will be set before June, he said.
“There are possibilities that we could go for more,” Nwankwo said. “The market is telling us, ‘look why are you just going for $100 million since its diaspora focused? Suppose they want to invest more in the Nigerian economy, won’t you frustrate them?’”
DMO returned to international debt markets for the first time in two years in July, issuing $1 billion in Eurobonds to fund power projects in an economy set to grow 6.7 percent this year, according to the World Bank. When the diaspora bond was announced in August, the debt agency said the funds would be used to finance capital projects.
Africa’s second-largest economy doesn’t have plans this year to sell another conventional Eurobond until the diaspora issuance and an 80 billion-naira ($502 million) offering of global depositary receipts planned for the first half are complete, Nwankwo said.
Nigeria’s outstanding public debt stock was N8.3 trillion as of September 30, with external borrowing accounting for N1.3 trillion of the amounts, according to the agency.
The yield on Nigeria’s $500 million in Eurobonds due July 2023 declined seven basis points, or 0.07 percentage points, this month to 5.85 percent by the close in London yesterday, the lowest since Nov. 7.
The debt office established a desk seven months ago to look into a possible federal government sale of Islamic debt, or sukuk, said Nwankwo.
Nigeria’s capital-markets regulator approved rules for selling bonds that comply with Shariah law in February last year in a country where about half of its about 170 million people practice Islam. Osun state, an inland region in Nigeria’s southwest, issued the nation’s first sukuk, selling 10 billion naira in September at a coupon of 14.75 percent.
“The sukuk is an area we want to go into to diversify the sources of funding,” Nwankwo said. “It’s most unlikely we issue federal government sukuk in 2014, but I believe in 2014 we will have been able to organize ourselves to have a framework and a strategy of what we want to do with and about sukuk and related instruments.”