The Federal Government of Nigeria is preparing to issue its first-ever dollar-denominated domestic bond on Monday, aiming to raise $500 million from a mix of local and international investors. This groundbreaking move comes as the government seeks to diversify its funding sources and attract foreign investment into the country.
The announcement, made by Dr. Gbadebo Adenrele, Managing Director of Investment Banking at United Capital Group, during a hybrid roadshow organized by the Debt Management Office (DMO), signals a pivotal moment in Nigeria’s financial markets. Adenrele confirmed that the auction will open next week on Monday, with more details to be communicated to investors.
A US dollar bond is not a bad idea, but one done LOCALLY in Nigeria, has been my concern. As I noted in May 2024, doing this US dollar bond in Nigeria will bring the fight on Naira at home, unlike if they have done it in New York or London, and import the USD into Nigeria.
First, Nigeria needs this money for many reasons which include defending Naira, funding the national budget, servicing our debts, etc. They call it a “bond” but it is nothing but a loan which investors give to the government, and the government will repay the loan, with interest and the principal as agreed.
The government possibly hopes to entice people to bring those hidden US dollars which are in special bunkers, pillows, etc into the banking system in Nigeria. I doubt if criminals will do this for a 10% yield rate when they can make 10,000% return overnight. Yet, this is so amazing for ordinary people: give the government USD and be paid interest in USD while in Nigeria – and when done, the government will return your principal in USD.
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Good People, the idea is good on paper, but this policy will destroy Naira further. Yes, he is coming again. Hold on – and chill. My point is simple: if you allow Nigerians to invest in USD to be paid interest in USD, people will sell Naira to look for USD to invest in this bond. In other words, Naira will WEAKEN because this bond will put pressure on the local currency.
I call the government to focus on its policy to support local manufacturers with the billions of Naira it is discussing. But instead of giving any company money, offer a credit-back guarantee. Through that mechanism, you eliminate briefcase companies. That said, the local USD bond offer opens on Monday which means our ranting here changes nothing!
Nigerian Government to Issue $500m First Domestic Dollar Bond on Monday
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