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Nairaland Forum / Nairaland / General / Business / Nigeria Sells $3 Billion Eurobonds - Largest Ever. (18111 Views)
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Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by seniwellsFX: 8:00pm On Nov 21, 2017 |
Pesuzok:you are smart Mr or Miss pesuzok. Yes,its a no brainer to invest in T-bills that pay 18%yield rather than a 6.5%yield rate on 10year bonds. It all boils than to investor asset class preference as well as the type of portfolio the investor operates. A strictly bond portfolio may not dip hands into any other financial instrument no matter how juicy the payout rate is. Bond firms love that long-term security that comes in the form of coupon. The best they can do just to get a taste of the supposed free meal is to allocate a minute fraction of their equity to T-bills and probably other asset class so as to have a well balanced portfolio. On the aspect or risk level,bonds do have way more lower risk level compared to T-bills. Although they are both fixed income instruments, the speculative nature of the T-bills market causes price to fluctuate more than the more calmer bond market. T-bills and Treasury bonds are both backed by government,but Incase of a debt default the bond holders are given preferential treatment compared to T-bills holders. Thirdly. T-bills issue to maturity date is not more than 1year of which the government may decide not to carry out another issuance the next year due to several factors. But in the case of bond issuance,its an obligation on the part of the government to uphold it's part of the agreement until the final year of the bond duration. This exposes the government to long term risk. These are few reasons why the yield rate on T-bills and bonds are far apart. I hope this explanation helps. 1 Like |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by Sanchase: 8:09pm On Nov 21, 2017 |
Eurobonds is selling debts to a buyer to repay them later after a period of time with interest, the intetest is usually around 6 percent. The duration can range from 1 to 30 years. The bonds are sold in the major International currency ie USD and repayed back in foreign currency. The bad part is that in 30 years or less Nigeria's dubious government might default. crownfierce: |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by Sanchase: 8:15pm On Nov 21, 2017 |
The Nigerian govt are selling debt instruments that will affect the future generation. EuroBond is a legal way to steal from Nigerians. MaryBenn: |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by Sanchase: 8:17pm On Nov 21, 2017 |
One of the best practices for Investment is truncate the duration for very volatile currencies. Pesuzok: |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by adeoba2008(m): 8:29pm On Nov 21, 2017 |
MaryBenn: Its just like selling shares in foreign currencies. |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by emmanuelewumi(m): 10:16pm On Nov 21, 2017 |
seniwellsFX: I doubt if you listened to the minister of finance nor you are conversant on why government opted for this euro bond at this point in time.. 2 Likes 1 Share |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by kafeii123: 11:59pm On Nov 21, 2017 |
Pesuzok: Apart from the fact that you will only be able to buy T-Bills with a local, Naira-denominated account into which the monies ('interest' and of course capital) will be paid, Buying 1yr TB @ 18% only makes more sense, if you can guarantee the local currency would not have slipped below its current value or if the slippage will not be large enough to engulf your intended 18% yield (if a euro is 200 naira now and you are sure that bad as e bad, d thing nor fit pass 236 naira when you want collect your money). For an economy like ours where what the naira has seen between 2015 - December 2016 is possible ( USD flew from 232 naira to about 495 naira i.e 113% jump), that kinda guarantee is a unicorn. Investors dance at the word fixed, safe etc... so its good enough for them. (imagine if those whose t-bills matured at that period converted their usd to naira to invest and now want to convert it to back to USD) plus... interest rates are falling in most of the eurozone, countries like Denmark, Sweden, Switzerland and Japan even have negative interest rates (A negative interest rate means the central bank and perhaps private banks will charge negative interest, so instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank). inflation in such countries are about 1.5% (Google) and they're complaining, ours is about ten times that, so in all... they will gladly loan us their money rather than keep it in their banks where they have to pay to keep it safe. Although some countries offer higher rates, Nigeria's offer is more attractive because just like with the Ponzi's (MMM and co.) Higher rewards portend higher risks, so countries with more juicy offers may also be at a higher risk of defaulting e.g venezuela and co. a default means that when the time comes for the country to return the borrowed capital, the government negotiates for a longer than agreed date. Hope I tried, na Engineer I be abeg 2 Likes 1 Share |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by pipz(m): 4:45am On Nov 22, 2017 |
ttmacoy: Euro Bonds can also be USD dominated. 1 Like |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by Emac34: 5:53am On Nov 22, 2017 |
seguno2:no be me talk am 1 Like 1 Share |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by Boss13: 7:20am On Nov 22, 2017 |
MaryBenn: Good question - First, a bond is a loan/debt certificate issued by a borrower to raise finance for their use. There are different kind of bond issuance and Eurobond is an international bond or debt. It is an unsecured debt, that is you do not need to provide collateral and it can only be raised by companies with good reputation- that is companies with good credit ratings. Some countries also go to the Euromarket (this is where Eurobonds are raised) to raise debt. The difference between an Eurobond and a Local Bond market is that you are raising debt finance in a currency (dollars) other than your local currency (Naira). 2 Likes |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by Boss13: 7:27am On Nov 22, 2017 |
BanevsJoker: You are actually saying the truth. The Government has borrowed to refinance its local debt and spend on 2018 budget. Don’t forget that 70% of our budget expenditures are recurrent items and hence the government borrowed $3bn to spend on recurrent expenditures and to pay off loans. Which means in 10 years time when this bond is due for repayment and after paying interest, the present government will have to go source for money to pay off this loan. The same for the 30 year issuance. However, the present administration that made this decision would be far gone or some of them dead by that time. Nigeria is in trouble. |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by jam04(m): 8:16am On Nov 22, 2017 |
jossey94: Unfortunately that's not the situation/reason for the Euro bond sold by Fg. They raised money to finance the 2017 budget. Yes we all know a year budget could run into the first quarter of the next year but can we sincerely say this is the case with Nigeria? This is the 3rd eurobond this year and we still have sukuk bond which we don't know the full details of repayment with the holders |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by Boss13: 8:46am On Nov 22, 2017 |
jam04: 2017 is over. What aspect of 2017 budget do they intend to fund |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by Dollabiz: 10:23am On Nov 22, 2017 |
Oh |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by jossey94(m): 1:10am On Dec 26, 2017 |
Hi. Saw the mention since but I have been too busy to reply. Hope it's not too late. $3 billion out of an approved $5.5 billion have been raised. $2.5 billion (out of the $3 billion) would be used for capital projects - this was recently released - while the balance was used to redeem T-bills maturing in December. The question I replied to was referring to the refinancing and not the capital expenditure part. Also, while this is the third Eurobond issue this year, the first two were for the 2016 budget while this one relates to the 2017 budget. I know it's kinda confusing cos of our messed-up budget cycle. Hopefully that would change in 2018. jam04: 1 Like |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by lexy2014: 10:45am On Feb 06, 2018 |
MaryBenn:in very simple terms, Nigeria is now indebted 2d tune of 3billion dollars |
Re: Nigeria Sells $3 Billion Eurobonds - Largest Ever. by lexy2014: 10:46am On Feb 06, 2018 |
crownfierce:in very simple terms, Nigeria is now indebted 2d tune of 3billion dollars. Na loan we go take so |
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