Nigeria Plans 10-Year Bond in First Foreign Sale, Meets Investors Tomorrow

Nigeria will start meeting investors in London tomorrow to build support as President Goodluck Jonathan’s victory in a primary election boosts confidence in the political stability of Africa’s most-populous nation.

Nigeria will seek to raise $500 million after Finance Minister Olusegun Aganga meets with investors, his spokesman Bayo Adeniji said by phone from Abuja today. The proposed bonds will mature in 10 years, said Jeremy Brewin, who helps manage $2.5 billion at Aviva Investors in London and was among the investors who received notice of the meetings.

The continent’s biggest oil exporter is pushing ahead with its bond sale plans, first announced in September 2008, as crude trades near the highest level in two years and before the final presidential election scheduled for April 9. Jonathan won the nomination of the ruling People’s Democratic Party on Jan. 14, ending uncertainty over his candidacy.

“Jonathan has just had a resounding victory in the PDP primaries, so that element of political risk will for the moment at least not be at the forefront of investors’ minds,” Razia Khan, head of Africa regional research at U.K.-based Standard Chartered Bank, said by phone today. “Top of everyone’s concerns would be the political risk, and that’s simply because of the extent it had been ignored by holders of the Eurobonds in Cote D’Ivoire.”

Ivory Coast missed an interest payment Dec. 31 on its $2.3 billion of dollar-denominated bonds amid a political standoff over disputed results of the Nov. 28 election between incumbent Laurent Gbagbo, who refuses to step down, and internationally backed winner Alassane Ouattara.

Ivory Coast Record Low

Ivory Coast’s Eurobonds fell to a record low today as the country said it would pay the interest if creditors recognize Gbagbo as president.

The bonds of the world’s biggest cocoa producer declined 0.2 percent to 37.667 cents on the dollar as of 1:38 p.m. in Abidjan, the commercial capital, according to data compiled by Bloomberg. That drove the yield on the 2.5 percent debt due 2032 up 3 basis points to 16.876 percent.

Nigeria is rated B+ by Standard and Poor’s, four levels below investment grade. Senegal, a similarly rated West African country, has $200 million of dollar bonds due in 2014 that yield 8.543 percent, according to prices on Bloomberg.

Nigeria may get a lower yield at 6 to 6.5 percent for 10- year notes, Stuart Culverhouse, chief economist at Exotix Ltd., a London-based brokerage, said in a phone interview today.

Liquidity

“Investors would prefer a larger issue say of $1 billion or $750 million,” Culverhouse said. A $500 million issue may not be “particularly liquid,” he said.

Nigerian officials will meet investors in two cities in the U.S. after London, Adeniji said, without providing further details.

The country’s credit quality may suffer if it is drawn into any military conflict resulting from the political crisis in Ivory Coast, said David Damiba, managing director of London- based Renaissance Asset Managers, with $150 million of assets in Africa.

Leaders of the Economic Community of West African States pledged on Dec. 24 to use military force to remove Gbagbo from power if he refused to step down. Military leaders from the region are due to meet this week in Mali to discuss possible intervention plans.

An eventual Ivory Coast default would be “an independent event” that shouldn’t affect the pricing of other regional bonds, Damiba said.

Nigeria, sub-Saharan Africa’s second-largest economy, plans to use the Eurobond as a benchmark for local companies to price debt and fund development projects, Aganga said in September. The country appointed Citigroup Inc. and Deutsche Bank AG to manage the bond sale, helped by Barclays Capital and FBN Capital Ltd.

To contact the reporters on this story: Jason Webb in London at jwebb25@bloomberg.net; Paul Okolo in Abuja at pokolo@bloomberg.net.

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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