Nigeria issues two Eurobonds with yields over 10% to address 2024 budget deficit 

Nigeria is returning to the international capital markets for the first time in over two years and plans to sell Eurobonds to help fund its 2024 budget deficit.

Details of the Eurobond Offering 

Nigeria will issue two types of bonds:

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•  6.5-year bonds worth $500 million, expected to yield about 10.125%.
• 10-year bonds (amount unspecified), expected to yield about 10.625%.

These bonds allow Nigeria to borrow money from investors who will earn returns through the bond yields.

Now, this is Nigeria’s first time issuing Eurobonds since March 2022. The bonds will be denominated in U.S. dollars with semi-annual coupons, and would follow a 144A/Reg S format—a structure that allows both U.S. and international investors to participate.

Bond Settlement 

The bonds will be officially settled (finalized) on December 9, 2024 and will be listed on the London Stock Exchange, with a minimum purchase amount of $200,000, and increments of $1,000 for additional investments.

The money raised will help the Nigerian government reduce its budget deficit, which has grown due to:

• Problems with crude oil production (a major revenue source for Nigeria).
• Low tax revenue.
• Lack of economic diversification beyond oil.

The sale of the bonds is managed by both international and domestic financial institutions, including Citigroup, Goldman Sachs, JPMorgan, and Standard Chartered. A Nigerian firm, Chapel Hill Denham, will also oversee the process as the local bookrunner.

Nigeria’s credit ratings are low but improving with a Caa1 (positive) rating from Moody’s and a B- (stable) rating from both S&P Global Ratings and Fitch Ratings. However, this bond issuance is crucial for managing Nigeria’s growing debt and improving its financial stability.

What You Should Know 

Initially, Finance Minister Wale Edun said Nigeria wouldn’t issue Eurobonds because it could lead to higher debt costs. But, due to low oil output and revenue shortages, the government now sees Eurobonds as essential to addressing its financial problems.