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Nigeria: FG Appoints Barclays Capital

The Federal Government of Nigeria has appointed Barclays Capital as adviser to its debut sale of a $500 million Eurobond. Another 10 countries with emerging economies are preparing for similar auctions.

The newspaper said it was an important win for Barclays Capital, which narrowly beat specialist financial adviser Newstate Partners to the mandate.

Both parties were encouraged to find Nigerian partners. It is thought Newstate teamed up with First City Monument Bank but it is not clear yet who will partner Barclays Capital.

Guaranty Trust Bank (GTB) scored a first in January 2007 when it successfully placed Nigeria’s first private Eurobond issue on the international capital markets.

The term of the bond, which is for five years with a fixed coupon rate of 8.625 per cent, was also first from a sub-Saharan company outside South Africa that has not been backed by guarantee from the government or an international development institution. The $300 million issue was over-subscribed at $521 million.

The size of the bond sale could be increased to accommodate the greater interest, he said. It is thought the appointment of bookrunners could push into next year.

The finance minister said he wanted to set a “benchmark price” that would make it easier for domestic businesses to raise money with more confidence as corporate borrowing rates had declined substantially.

Nigeria, the latest in a line of African countries to try to raise finance from the global debt markets, wants to fund objectives such as its substantial $100 billion infrastructure deficit.

African countries including Nigeria, Ghana and Kenya are among the countries that earlier indicated plans to launch Eurobonds but had put it on hold due to the global financial crisis.

The National Assembly had approved spending of more than N4.8 trillion this year, up more than 50 per cent on last year, meaning the country’s budget deficit is set to widen to more than five per cent of the Gross Domestic Product (GDP).

The monthly disbursal of oil revenues and windfall savings known as the Excess Crude Account (ECA) to the three tiers of government has left the account into which the country is meant to save windfall oil revenue, with just $460 million compared to $20 billion at the beginning of the current presidential term in 2007.

Nigeria’s foreign exchange reserves stood at $36.6 billion as at September 13, 2010, representing a decrease of $0.50 billion or 1.3 per cent when compared with the level of $37.16 billion as at end-July 2010.

Aganga said Nigeria was on track to achieve GDP growth of at least 7 per cent this year after the country’s economy grew by 7.4 per cent in the first half. He said 10 per cent growth by the end of next year was “doable”.

The appointment of Barclays Capital by the Federal Government, according to Sunday Independent, follows Morocco’s successful sale of -1 billion 10-year bonds last week – its first eurobond since 2007.

Senegal’s Finance Minister said last June that his country was looking to sell a $300 million bond next year to finance road projects and Tanzania is also planning a Eurobond sale within the next 12 months.