A Review of the Nigerian Energy Industry

AfDB to raise $1.5bn from Nigeria, Zambian bond markets

AfDB10 July 2013, Lagos – The African Development Bank, AfDB, says it is planning to raise about $1.5 billion in local-currency bonds in Nigeria and Zambia to finance infrastructure projects as emerging market bond yields rise on speculation that the Federal Reserve will reduce economic stimulus.

The Tunis-based AfDB, which gives money to African governments for projects in areas such as roads, ports and energy, is completing the planned size of the medium-term note programmes and had been in talks with authorities in the two countries, Bloomberg quoted the Financial Technical Services Manager, AfBD, Olivier Eweck, to have revealed this in an interview from the Tunisian capital on July 5.

“Before the end of the month we would have made up our minds on the numbers,” he said.

The Nigerian issues may  be  worth   as much as  $1 billion and the Zambian debt may reach the kwacha equivalent of $500 million.
African countries are stepping up sales of local and foreign debt, targeting funds for infrastructure on a continent where many lack regular access to services such as water and electricity.

The offers came as borrowing costs increase amid speculation that the Fed would begin scaling back the US debt-buying programme  that pumped cheap money into assets around the world, including emerging markets.

Yields on emerging-market bonds rose six basis points, or 0.06 per cent point, to 5.86 per cent Tuesday, JPMorgan Chase & Co. data showed. Borrowing costs on naira-denominated debt due January 2022 rose to a 10-month high of 14.73 per cent on June 11, three weeks after Fed Chairman,  Ben Bernanke indicated stimulus may be scaled back.

Nigeria raised $1 billion of five-year and 10-year Eurobonds for power projects on July 2. The sale followed Rwanda’s $400 million issue in April, while Ghana and Kenya have announced plans to sell international debt in 2013.

The Head of African Economic Research at Standard Chartered Plc, London, Razia Khan, pointed out that some investors would want to put money into frontier markets, “quantitative easing or no quantitative easing.”
Countries need to spend about $93 billion a year on infrastructure in the next 10 years to boost growth and business productivity, the World Bank had said.
The first tranche of the local-currency debt in both Nigeria and Zambia would be offered “well before year-end,” Eweck said, adding that the AfDB wants the Nigerian program to continue for “several years at least.”
“If a project is generating local currency it needs to be financed in local currency,” Eweck declared.

Multinational companies may follow AfDB in selling local-currency debt, Khan said.

According to Khan, “It isn’t just about raising the money that’s required for infrastructure development, but they’re also doing their bit for developing the local markets. The whole idea is there is more liquidity in those debt markets as a result.”

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