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Nigeria Considers Doubling Diaspora Bond to Lure Citizens

A general view of congested traffic in central Lagos, Nigeria. Photographer: Dan Kitwood/Getty Images
A general view of congested traffic in central Lagos, Nigeria. Photographer: Dan Kitwood/Getty Images

Jan. 21 (Bloomberg) -- Nigeria 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 Management 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 said in an interview on Jan. 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 it’s diaspora focused? Suppose they want to invest more in the Nigerian economy, won’t you frustrate them?’”

The government of Africa’s biggest oil producer 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.

Islamic Debt

Nigeria’s outstanding public debt stock was 8.3 trillion naira as of Sept. 30, with external borrowing accounting for 1.3 trillion of the amount, according to the agency.

The yield on Nigeria’s $500 million in Eurobonds due July 2023 declined seven basis points, or 0.07 percentage point, this month to 5.85 percent by 9:46 a.m. in London.

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.”

To contact the reporter on this story: Chris Kay in Abuja at ckay5@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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