http://234next.com/csp/cms/sites/Next/News/National/Economy/5664932-146/story.csp


The Financial Time of London reports that major investors are snubbing Nigeria’s Euro bond which debuts today.

According to the report, investors are concerned at the way funds in the Excess Crude Account have been utilised. ‘’ Mounting concern about a huge outflow of money from Nigeria’s “rainy day” oil fund has prompted some big investors to shun the country’s debut international bond issue on Friday’’, says the paper.

Although Nigerian officials have said there is a lot of interest in the $500m bond issue, the Financial Times says ‘’ several major funds have told the Financial Times they are not interested in the deal because of Nigeria’s deteriorating fiscal situation and worries about how President Goodluck Jonathan’s government has run the excess crude account, designed to store up windfall oil revenues.’’

The excess crude account was set up during the tenure of the former President of Nigeria, Olusegun Obasanjo. According to the Financial Times report, ‘’ at that time there was $20bn in the fund. But as recently as last September there was less than $400m, according to public disclosures, which showed billions flowing out of the account last year.’’

According to Financial Times calculations, ‘’ more than $30bn of revenues – calculated on the difference between the budgeted and market price of oil – has flowed out of the account, according to donor and government officials. The funds went partly in regular payments to state governors over which there was little subsequent oversight, and partly in federal spending on infrastructure. ‘’

The Financial times quotes Antoon de Kler of South African based investec as saying“ the fact they have run down the excess crude account is very worrying,“ “it is unclear where the money is going”. “Why does a country that relies for 90 per cent of its income on oil, which has seen a big rise in price, needs to run down its foreign exchange reserves? For these reasons we are not buying the bond.”

And according to the Financial Times, he wasn’t the only one that expressed these concerns. ‘’ Other big international investment funds, which invest in Africa, also told the FT they would not participate in the sale. Some Nigerian politicians and officials have questioned why foreign reserves have not risen, and the excess crude account did not grow during the past year of rising oil prices.’’

$16 billion is what Nigeria is believed to have earned in ‘’ windfall revenues in 2010,’’ These figures according to the Financial Times were based on information from technocrats working within Nigeria’s administration and the calculations are ‘‘ based on production of 750m barrels of oil with average oil prices $21 higher than the $60 budgeted.’’

Nigeria’s finance Minister , Olusegun Aganga, told the FT that in addition to some of this money going to the country’s Joint venture partners, the country ‘‘ spent heavily on oil production last year and on clearing arrears to oil companies’’ adding that ‘‘ the government had also partly financed the budget deficit out of the excess crude account to reduce domestic borrowing.’’

NEXT’s efforts to get through to Mr. Aganga for his reaction to the Financial Times story have so far been unsuccessful although, we will keep trying.

I have said it before that the Greatest mistake than Nigerian will make is to elect Jonathan in Y2011, Jonathan does not have clue about economy and runing Nigeria.

Should Jonathan wins the April 2011 poll,then our economy will be nearing total collapse.He has proved to us several times that he lacks fiscal discipline when it comes to money matters,this is a big weakness on the part of a true Leader .He has withdrawn huge sums from both Excess vrude Oil accounts &f oreign reserves,he has borrowed millions of dollars & also planning to borrow more to finance 2011 budget,yet some nigerians out of sentiments believed he is the right man to lead this nation.

I agree 100%  The rapid depletion of the Excess Crude Account and The reserve is clearly abnormal. I suspect if things carry on this way Nigeria will declare bankruptcy. 

One way out is the immediate shrinking of government. This style of of governance is too expensive and unsustainable.

typical example

You have a  Minister of Works and you also have Minister of State for Works . what job does a  Minister of state carry out that Minister cannot do and then you have a permanent secretary of works. 

Over bloated nonsense.

Something that debuts today?

What do you expect? a rush?

Shut up NEXT - you cant prove that investors shun it, why not wait till then end before writing your story?

However Reuters says it will be over subscribed with $1 billion already in demand.

http://af.reuters.com/article/nigeriaNews/idAFLDE70K12220110121

J. P. Morgan says it will yield more than Ghana.


http://www.bloomberg.com/news/2011-01-19/nigeria-s-500-million-eurobond-to-yield-more-than-ghana-s-jpmorgan-says.html

Ma_J_Blige:

J. P. Morgan says it will yield more than Ghana.


http://www.bloomberg.com/news/2011-01-19/nigeria-s-500-million-eurobond-to-yield-more-than-ghana-s-jpmorgan-says.html

BECAUSE NIGERIAN GOVERNMENT IS PAYING 7% interest on bonds which is higher than ghana .
why pay 7% interest on bond over many number of years when saving 500 million of rainy day fund will suffice?  and with global oil prices at 90 $ why go for bond issue when  after a few weeks the excess crude oil fund will get inflow due price difference?

EKONGKING:

BECAUSE NIGERIAN GOVERNMENT IS PAYING 7% interest on bonds which is higher than ghana .
why pay 7% interest on bond over many number of years when saving 500 million of rainy day fund will suffice?  and with global oil prices at 90 $ why go for bond issue when  after a few weeks the excess crude oil fund will get inflow due price difference?

I guess that is what is expected to attract the investors, i don't see anything bad in that as long as both parties are ok with the deal.

I hope and pray that we do not end up with this clueless government in April.

Well, I dont know much about economics and such matters, but wouldn't the fact that Nigeria is due to go to the polls in a matter of months amd therefore no CERTAINTY of even short term leadership, have a measurable effect on how much foreigners are willing to invest or put money at risk in Nigeria on this side of the election?

I may be wrong, but its just a thought.

barnabasj:

http://234next.com/csp/cms/sites/Next/News/National/Economy/5664932-146/story.csp


The Financial Time of London reports that major investors are snubbing Nigeria’s Euro bond which debuts today.

According to the report, investors are concerned at the way funds in the Excess Crude Account have been utilised. ‘’ Mounting concern about a huge outflow of money from Nigeria’s “rainy day” oil fund has prompted some big investors to shun the country’s debut international bond issue on Friday’’, says the paper.

The excess crude account is an anomaly that should not exist. Our emergency funds are in the foreign reserves. This excess crude account crap should be stopped. Give the states any excess oil money or re-invest it.

doja:

I hope and pray that we do not end up with this clueless government in April.

What in all honesty is the meaning of this statement?

Ma_J_Blige:

What in all honesty is the meaning of this statement?

u must be high on kunu if u don't understand. . .

@ All,

I'm interested in buying some of these bonds but don't know how to go about it.

blacksta:

I agree 100%  The rapid depletion of the Excess Crude Account and The reserve is clearly abnormal. I suspect if things carry on this way Nigeria will declare bankruptcy.  

One way out is the immediate shrinking of government. This style of of governance is too expensive and unsustainable.

typical example

You have a  Minister of Works and you also have Minister of State for Works . what job does a  Minister of state carry out that Minister cannot do and then you have a permanent secretary of works.  

Over bloated nonsense.

Nice observation.

This question must be asked.

The topic of this thread is a bold face lie. The said offering were 2.6 times subscribed and was sold primarily to US and UK investors.

Nigeria is not doomed as most of you seccessionists hope.

ndu_chucks:

The topic of this thread is a bold face lie. The said offering were 2.6 times subscribed and was sold primarily to US and UK investors.

Nigeria is not doomed as most of you seccessionists hope.

If your people continue to target innocent Christians, then this country is doomed no matter the economic climate.

I am disappointed at this report coming from Next. It is obvious that NEXT and their cronies derive joy in running Nigeria down. The said bond was over-subscribed to by $1.25 Billion. That is nearly 300% of what was expected. This shows the confidence of international community in the prospect of Nigeria economy. Yet a newspaper of Next standard will do a sotry that such bond was shuned by investors said emptiness of reasoning in the entire editorial team of NEXT.

Alxmyr:

I am disappointed at this report coming from Next. It is obvious that NEXT and their cronies derive joy in running Nigeria down. The said bond was over-subscribed to by $1.25 Billion. That is nearly 300% of what was expected. This shows the confidence of international community in the prospect of Nigeria economy. Yet a newspaper of Next standard will do a sotry that such bond was shuned by investors said emptiness of reasoning in the entire editorial team of NEXT.

Relax Man

Initially an article by the Financial times of London reported that investors were wary of the whole bond thing and number of investors had stated they werent going to bid due to the way Nigeria mismanaged the Excess crude account.

I believe that Next News were reporting along that line and I suspect there must have been last minute surge in interest but it is unfortunate that next had already gone to print.

Thanks for the links, @Ma_J_Blige.

Looks like you are correct, the NEXT article is too negative.

I found this quote from Aganga interesting:

"This transaction clearly puts Nigeria on the global map. We now have a transparent and internationally observable benchmark against which international investors can accurately price risk," Aganga said, forecasting a rise in foreign investment into sub-Saharan Africa's second-biggest economy.

eku_bear:

Thanks for the links, @Ma_J_Blige.

Looks like you are correct, the NEXT article is too negative.

I found this quote from Aganga interesting:

Mr Man

The next article is about 22 hours old .  Below is quote from the financial time  - roughly about 22 hours old



"However, several major funds have told the Financial Times they are not interested in the deal because of Nigeria’s deteriorating fiscal situation and worries about how President Goodluck Jonathan’s government has run the excess crude account, designed to store up windfall oil revenues."


Published: January 20 2011 22:07 | Last updated: January 20 2011 22:07


http://www.ft.com/cms/s/0/05e178da-24d3-11e0-a919-00144feab49a.html#axzz1Bi2s7w1X

^-- Reuters article that she linked to:

UPDATE 5-Nigeria's debut Eurobond heavily oversubscribed
Fri Jan 21, 2011 8:16pm GMT

* Issue oversubscribed, priced at 7.0 pct yield

* Debt ratios low, growth robust

* Fall in foreign reserves worries some investors

(Adds comment from finance minister)

By Nick Tattersall and Chijioke Ohuocha

LAGOS, Jan 21 (Reuters) - Nigeria issued a $500 million debut Eurobond on Friday with a 7.0 percent yield in a deal that was heavily oversubscribed, as appetite for high-yielding assets outweighed concern about its depleted oil savings.

Investors from 18 countries spanning Europe, the United States, Asia and Africa took up the offer, which was 2.5 times oversubscribed, Finance Minister Olusegun Aganga said.

"This transaction clearly puts Nigeria on the global map. We now have a transparent and internationally observable benchmark against which international investors can accurately price risk," Aganga said, forecasting a rise in foreign investment into sub-Saharan Africa's second-biggest economy.

The successful issue by Africa's top oil exporter, months ahead of elections, could reassure others on the continent of the strength of demand for African debt, convincing them to press ahead with similar but delayed plans.

However, there is at least one guy who is a skeptic:

One leading fund manager who participated in Eurobond issues by Ghana and fellow African oil producer Gabon at the end of 2006 said he was steering clear of Nigeria's offering given concerns over the huge outflows from oil savings.

Anyway, the NEXT article was obviously too pessimistic, given how much demand there was for the bonds.

Lets put some things into perspective

$500 million is a very small amount for a bonds issue
The Financial Times stated that most funds were stearing clear of the issue but nothing stops private investors from buying. Also, nothing stops corrupt Nigerian govt. officials from buying these bonds; its a good way of earning fantastic interest on cash that you can't hide.

The key thing here is that europeans funds stayed away from it. I am not convinced until I see a profile of the major investors and at what interest the bonds went for. Portugal had a bonds issue of 6.7% two days ago which is slightly less than the 7% it can't afford.

katsumoto:

Lets put some things into perspective

$500 million is a very small amount for a bonds issue
The Financial Times stated that most funds were stearing clear of the issue but nothing stops private investors from buying. Also, nothing stops corrupt Nigerian govt. officials from buying these bonds; its a good way of earning fantastic interest on cash that you can't hide.

The financial times report sited by you and 234next published their article before the bonds became available for subscription – their source of information was dead wrong. According to WSJ “Order books for the debut offering were around 2.6 times subscribed and was sold primarily to U.S. and U.K. investors”. Read the WSJ article here

European funds and US funds were the main subscribers as opposed to individual investors. If the main subscribers were individual investors, no one would expect WSJ to omit that information in their article. If you have any evidence to support your claims lets have it.


By the way $500million is not small at all, for us here in Africa.

Kalu Akanu:


If your people continue to target innocent Christians, then this country is doomed no matter the economic climate.

Who are these people of yours that target innocent Christians? It appears you can’t help yourself – continue to wallow in ethnic and religious bigotry and it will consume you. In the maintime, Flee flea!! mumu

I have said it before that the Greatest mistake than Nigerian will make is to elect Jonathan in Y2011, Jonathan does not have clue about economy and runing Nigeria.

Should Jonathan wins the April 2011 poll,then our economy will be nearing total collapse.He has proved to us several times that he lacks fiscal discipline when it comes to money matters,this is a big weakness on the part of a true Leader .He has withdrawn huge sums from both Excess vrude Oil accounts &f oreign reserves,he has borrowed millions of dollars & also planning to borrow more to finance 2011 budget,yet some nigerians out of sentiments believed he is the right man to lead this nation.

Haba! Barnabas, Easy now. Na quarell? Take a breadth to read this post from REUTERS:

LAGOS, Jan 21 (Reuters) - Nigeria issued a $500 million debut Eurobond on Friday with a 7.0 percent yield in a deal that was heavily oversubscribed, as appetite for high-yielding assets outweighed concern about its depleted oil savings.

Investors from 18 countries spanning Europe, the United States, Asia and Africa took up the offer, which was 2.5 times oversubscribed

Any further comments fellow Nigerian. However, that doesn't mean you must vote Jonathan, just keep politics out of dear patriotic Nigerian.

The pricing of these bonds fascinates me. Never taking a finance class before, but reading up on the subject to understand some of it.

Finance in general. . . quite a sexy field.

I don't trust  this Aganga. From the outset, I knew he 's there for himself. yOU CAN HAVE DECENT LIVING ABROAD BUT NO MILLIONS.

5oo million. That's just nothing. Let them continue to deplete our ECA and foreign reserve. Yeye people.

By the way, the US have stopped critizing Naija since GEJ came in. He's not veering towards China. Corrupt or not. LOL.

ola olabiy:

I don't trust  this Aganga. From the outset, I knew he 's there for himself. yOU CAN HAVE DECENT LIVING ABROAD BUT NO MILLIONS.

Goldman Sachs guys make a lot of money. Finance in general in the West you can make sh1tloads. Pretty reasonable that he is worth millions; I'd expect no less.

eku_bear:

Goldman Sachs guys make a lot of money. Finance in general in the West you can make sh1tloads. Pretty reasonable that he is worth millions; I'd expect no less.

Maybe 1 or a couple of milla. And, what about taxes. That is nothing and he knew this. A commissioner in any state would run him close.


Now, compare a minister.

ola olabiy:

I don't trust  this Aganga. From the outset, I knew he 's there for himself. yOU CAN HAVE DECENT LIVING ABROAD BUT NO MILLIONS.

5oo million. That's just nothing. Let them continue to deplete our ECA and foreign reserve. Yeye people.

By the way, the US have stopped critizing Naija since GEJ came in. He's not veering towards China. Corrupt or not. LOL.

what do you mean?

I bet you trust Soludo? innit?

,