The dollar is weakening against its peers on expectations the Federal Reserve has come to the end of its rate-hiking cycle, while talk is growing of a cut early in the new year
IBTimes NG

The Nigerian government has raised $900 million through its first-ever domestic dollar bond sale, intending to diversify funding sources and avoid high results in international markets.

The bond sale will provide much-needed hard currency for Africa's largest economy, which has faced severe dollar shortages, leading the central bank to devalue the naira twice in less than a year.

Minister of Finance and Coordinating Minister of the Economy Wale Edun said, "I am particularly pleased that as Chair of the African Caucus, we have launched an initiative that not only strengthens Nigeria's economic resilience but also expands the horizon for capital markets of African economies," Premium Times reported.

The five-year domestic dollar bond has a 9.75% interest rate, according to the Africa Finance Corporation (AFC). The bond was highly popular, with demand exceeding the amount issued by 180%.

"The successful issuance demonstrates AFC's pivotal role in supporting the Nigerian government's commitment to deepening domestic capital markets, promoting financial inclusion and diversifying funding sources," AFC said.

The corporation further said that this bond marked "the first issuance under the FGN's Domestic US Dollar Bond Program," and added "proceeds of the bond issue will be invested in critical sectors of the Nigerian economy approved by the President on the recommendation of the Minister of Finance, subject to appropriation by the National Assembly."

The domestic dollar bond was aimed at local investors, pension funds and Nigerians living abroad, to support the local naira currency.

Local and diaspora investors tend to keep their investments longer, making these bonds less likely to experience large fluctuations in value. Once listed on two local exchanges, investors will be able to trade the bond, according to AFC.

Executive Director at AFC Banji Fehintola said that Nigeria's first domestic U.S. dollar bond was a major milestone for the country's capital markets. He noted that AFC was proud to have been the Global Coordinator for this important deal.

Fehintola emphasized that the successful bond issuance highlighted Nigeria's economic potential and showed the value of African countries using their domestic capital to fund development.

AFC has a strong history in capital markets, including issuing a $1.16 billion global syndicated loan earlier this year.

The Corporation recently won "The Most Innovative Bond" award for its JPY 75 billion Samurai Bond Guarantee to Egypt and "Best Supranational Syndicated Loan" for securing a $625 million syndicated loan last year, attracting new lenders from the Middle East and Asia.