^^Will you shut up woman! It gets annoying when bovine brained people start to lecture those with knowledge. Instead of taking the lesson 4Play has taught you, you are here telling us that some diasporans reh reh reh. Coming from someone who thought that having a higher yield than Ghana indicates that our bond outperformed Ghana, why should we take advice from a sciolistic charlatan like yourself with hay for brains?

In finality, yes Government bonds are generally oversubscribed, however, some Investors have shunned the bond issue, pulling up the reckless drawdown of the ECA as a cause for concern. These are foreigners, not Nigerians. So when we say that the current Govt is reckless in spending, no be only we wey see am, oyigbo sef talk am.

well, the idea of 7% on bond is a little bit high, but i will see it as the govt trying to buy reputation for its corporate world.

Ibime:

^^Will you shut up woman! It gets annoying when bovine brained people start to lecture those with knowledge. Instead of taking the lesson 4Play has taught you, you are here telling us that some diasporans reh reh reh. Coming from someone who thought that having a higher yield than Ghana indicates that our bond outperformed Ghana, why should we take advice from a sciolistic charlatan like yourself with hay for brains?

In finality, yes Government bonds are generally oversubscribed, however, some Investors have shunned the bond issue, pulling up the reckless drawdown of the ECA as a cause for concern. These are foreigners, not Nigerians. So when we say that the current Govt is reckless in spending, no be only we wey see am, oyigbo sef talk am.

LOL - is that all you can say? You must be a primary school school boy.

So, your 4 play or whatever is better than every other person who thinks different from what you think? Which lecture has he given?

These shows the kind of person you are, resulting to curses and abuses just because you want to make a point and just because someone is in dis agreement or shares a different opinion from that which you hold?

Simply shows you are not worth having a discussion with. I simply laughed at you and your shallow mindedness.

I am not in your league and will not result to your deranged method of cursing and abusing when there are absolutely better human methods of passing forth your message rather than the animalistic tendencies which you have just exposed. LOL.

How did you get the article? if your a suscriber you better take the like down and simply copy the story, you may have just pasted access to your ft account!

Haba Ibime? Why now? Let us encourage and adopt good communication and co-operation skills - which are desperately needed in Nigeria.

The issue should have been assessed and reported as simply "Not a failure".

Describing the issue as a 'success' for any reason at all is really pushing it.

I am sure the coupon yield is heavily loaded with risk premia. Who wouldnt given our sickening kleptomania and the relentless depletion of the ECA?

M J Blige - sorry jare.

never knew[img]http://2.s07.flagcounter.com/count/DymW/bg=ffffff/txt=ffffff/border=ffffff/columns=1/maxflags=1/viewers=3/labels=0/[/img]
[img]http://s07.flagcounter.com/count/DymW/bg=ffffff/txt=ffffff/border=ffffff/columns=1/maxflags=1/viewers=3/labels=0/[/img]

eku_bear:

Hrm: http://dealbook.nytimes.com/2007/02/13/for-goldmans-highest-echelon-a-salary-to-match/
http://www.jobnob.com/goldman-sachs-co-salary
http://news.efinancialcareers.com/NEWS_ITEM/newsItemId-8444

So $300k + bonuses? From that third link, 300k or 400k might be a good estimate of the bonuses. So more like $600k/year if he was only a managing director and not partner managing director.

Not $1 mil/year. Certainly enough though to become comfortably a millionaire in a short period of time, assuming you save/invest some of it.

I know for sure he would not have made less than £1m ($1.6m) a year in the boom years (2003 -2007). I said for sure because I had a girl in HR that showed me real salary figures of anyone I wanted to know. The MD, Head of Strategy (Europe) was paid £1.5m and remember he is not is in a profit-generating role. MD, Head of Project Finance (Europe) was paid £1.8m.

Considering the area (Profit-generating) Aganga was working, even if he was not a continental head, I will expect he made at least £1m per year as an MD in London.

For him to have been promoted to MD in Goldman Sachs within 2 years, I would expect he was a Partner at Ernst and Young before moving over. Even in E&Y, as a Partner, average pay of Partners would have been north of £500K ($750K).

dayummmmmmmmmmm, thats all i got to say about this,

eku_bear:

Is the 1 or 2% difference that big a deal?

Plus the effective interest rate will fluctuate on the open market with the confidence that others have in the Nigerian economy, yes?

The most useful thing about the bond to me is that it will make it easier for Nigerian organizations to borrow from foreign ones (if I understand things correctly.)

Easier for foreign banks to price a loan if they have this Eurobond as a reference point, I think.

It is a big deal because it not only increases the cost of your yearly coupons but it also increases the cost of insuring your debt. When there was talk of greek default last year, the cost of issuing bonds increased to 18%. So sometimes you may even be able to pay the coupons but unable to pay the insurance costs.

Similarly, if you think 1% or 2% is nothing, try taking a mortgage at 7% when everyone else is paying 5%. Now multiply that additional 2% on a $500,000 mortgage on a $500m bond issue.

@ Ibedun/Mary J,

Nor blame me. Someone with pre-basic foundation in economics boasted that Nigerian yield is higher than Ghanas. . . exposing her lilliputian knowledge of basic finance. After our resident guru 4Play gave her a basic 101, instead of humbling herself to receive the lesson, she started dishing advice to 4Play to stop speaking grammar and that most Nigerians abroad see nothing good in Nigeria reh reh reh.

It is this kind of high faluting pride based on ignorance that needs to be checked before we can ensure proper communication. . . as some of you have called for. Mary J Blige arguing economics with 4Play in blind defence of her PDP Godfathers is akin to a primary school student arguing with Ben Bernanke. . .so next time I would call for sciolistic elements to humble themselves in the face of vastly superior intellect as the ability to type on Nairaland does not guarantee one the standing to hold discourse with everyone on every subject.

ADint:

^^ You are quite right and I agree with you here, you seem to have grasped the essence of the bond issue - which is to open up Nigeria to the international bond market to assess cheaper funds. I doubt that the Nigerian govt really needs the $500m being raised here, but are looking to create an international appetite for Nigerian bonds and they had to come to the market with a decent amount and I guess $500m was just about right.

Currently the Nigerian govt issues bonds locally in Nigeria (naira) at up to 14%, the naira has not moved too much against the dollar in the last 5 years (apart from a deliberate action by the CBN a few years ago), so it makes sense to start raising funds in dollars at around 7% and set this as a benchmark for other corporate/private/governmental institutions in Nigeria who can now take advantage of this opening. The foreign exchange risk btw the naira and the dollar has been historically low, and can be quite easily managed and mitigated with the right financial instruments and clever planning, since the interest and the principal repayments in most cases would be generated in naira and subsequently converted to dollars.

The bottomline is - why borrow in naira at 14% when we can borrow in dollars at 7%??

I am sorry but that is a load of crap. There is a difference between bonds issued by a nation and corporate bonds. Sometimes, there is a 3% difference between American treasury notes and American corporate bonds. If Nigeria is issuing coupons at 7%, why do you assume that corporate, local government, or state issued bonds will also be issued at 7%? Or are you stating that the risk premium is 0% if the risk-free rate is 7% (in this case, the Nigerian coupon rate is the risk-free rate)?

Also, borrowing on the international market does not mean that your borrowing costs will be cheaper than borrowing in Nigeria. If Nigeria is borrowing at 7%, then at a minimum, other institutions will borrow at approximately 10% plus the additional higher cost of insuring your debt. No underwriter will underwrite a bonds issue without expecting insurance. If Western nations are paying insurance, then Nigerian institutions will pay higher insurance costs.

ibedun:

Haba Ibime? Why now? Let us encourage and adopt good communication and co-operation skills - which are desperately needed in Nigeria.

The issue should have been assessed and reported as simply "Not a failure".

Describing the issue as a 'success' for any reason at all is really pushing it.

I am sure the coupon yield is heavily loaded with risk premia. Who wouldnt given our sickening kleptomania and the relentless depletion of the ECA?

You are on the right path; over-subscription does not determine the success of a bonds issue. The coupon rate demanded by the market plus the additional costs of the issue (insurance, etc). The risk premium will determine all that. So Nigeria may be paying over the odds for this.

If Somalia issues bonds at say 12% (or the rate set by the market), you will find investors who will consider taking the risk. The rate will always reflect the risk of default.

Ibime:

@ Ibedun/Mary J,

Nor blame me. Someone with pre-basic foundation in economics boasted that Nigerian yield is higher than Ghanas. . . exposing her lilliputian knowledge of basic finance. After our resident guru 4Play gave her a basic 101, instead of humbling herself to receive the lesson, she started dishing advice to 4Play to stop speaking grammar and that most Nigerians abroad see nothing good in Nigeria reh reh reh.

It is this kind of high faluting pride based on ignorance that needs to be checked before we can ensure proper communication. . . as some of you have called for. Mary J Blige arguing economics with 4Play in blind defence of her PDP Godfathers is akin to a primary school student arguing with Ben Bernanke. . .so next time I would call for sciolistic elements to humble themselves in the face of vastly superior intellect as the ability to type on Nairaland does not guarantee one the standing to hold discourse with everyone on every subject.

I pity you if this is what you have turned this into.

Look, life is not as difficult as you are making it to be- for one, I wasn't referring or arguing or even commenting to you or on your inputs, whether right or wrong.

Look- take life easy. Today you are alive, arguing, cursing and abusing who hasn't done anything wrong to you rather than having a different opinion to what you hold, tomorrow you are no more, dead, gone, spat at and buried forever- then, those who u have belittled and spat at, cursed and abused will still be the one reading about your obituary and asking God to keep your soul at peace. How can the soul be at peace who has refused to be at peace with all men?

I sincerely pity you.

^^^^Are you really ok, woman? Do you need to be so uncouth in your reckless support for GEJ and everything PDP.

Right now, you hate everything anti-GEJ/PDP/government.


Are you alright? Be civil, ok?

4 Play:

Yes, I can comment on the naive notion that over-subscription is the mark of a successful bond issue when the key issue for the borrower is the interest rate he has to pay to the lenders. If Gabon and Ghana can issue 10 year bonds at 5.8% and 6.2% respectively, why do you rubes fall for the idea that borrowing at 7% p/a is to be celebrated?

If you offer sovereign bonds at punitive yields, there will inevitably be over-subscription but that is not a mark of success. Think of it this way, supposing a trader wanted to sell a car and cars of the same make and in similar condition are going for $4,000. However, due to the seller's less than wholesome reputation, he can only offer to sell at $3400. Inevitably, if potential buyers hear that a car which they have to pay $4000 is being offered at a steep discount, the dealer will have more buyers. However, from the dealer's perspective, the trade is not a success.

This is how bond issues are assessed. For people like you, if they hear that NNPC has been sold for $10m and that the Govt claimed the bid process to be a success because loads of investors were interested, you will swallow it hook, line and sinker. They're playing on your ignorance.

I think a point of correction is in order here.  The Ghana 10 year sovereign bond issue was for $750 million and the bonds were sold to foreign investors in  late September 2007 at a coupon (yield) of  8.50%.  The Gabon issue was for $1 billion and was sold in December 2007 at a coupon of 8.20%.  These are the respective links for both issues.   http://news.myjoyonline.com/features/200710/9801.asp     http://www.whitecase.com/press_12132007/

On this basis it would appear that the Nigeria issue was  quite  successful, given the current uncertain political atmosphere in the country and the opaqueness of the country's finances.  The yields quoted in the comments above are current market yields for the Ghanaian and Gabonese bonds whose  terms are now just under 7 years, and therefore cannot be used as a basis for comparison to the Nigerian bond issue.  At the same time  shorter dated bonds,  tend to have lower yields than longer dated bonds in the bond market.  I hope this clarifies the position for Nairalanders.

kulutempa:


I think a point of correction is in order here.  The Ghana 10 year sovereign bond issue was for $750 million and the bonds were sold to foreign investors in  late September 2007 at a coupon (yield) of  8.50%.  The Gabon issue was for $1 billion and was sold in December 2007 at a coupon of 8.20%.  These are the respective links for both issues.   http://news.myjoyonline.com/features/200710/9801.asp     http://www.whitecase.com/press_12132007/

On this basis it would appear that the Nigeria issue was  quite  successful, given the current uncertain political atmosphere in the country and the opaqueness of the country's finances.  The yields quoted in the comments above are current market yields for the Ghanaian and Gabonese bonds whose  terms are now just under 7 years, and therefore cannot be used as a basis for comparison to the Nigerian bond issue.  At the same time  shorter dated bonds,  tend to have lower yields than longer dated bonds in the bond market.  I hope this clarifies the position for Nairalanders.

God bless you for that correction.
For those of us who aren't financial experts reading this, it is now obvious that the headline for the story is mischievous.
Let us put sentiments aside and address issues as they are, i may not agree with the Nigerian govt most times but when they succeed, lets not take credit away from them.I wouldn't blame people anyway, we have all been let down for so long we hardly ever see anything good about the country again.

Katsumoto:

I am sorry but that is a load of crap. There is a difference between bonds issued by a nation and corporate bonds. Sometimes, there is a 3% difference between American treasury notes and American corporate bonds. If Nigeria is issuing coupons at 7%, why do you assume that corporate, local government, or state issued bonds will also be issued at 7%? Or are you stating that the risk premium is 0% if the risk-free rate is 7% (in this case, the Nigerian coupon rate is the risk-free rate)?

Also, borrowing on the international market does not mean that your borrowing costs will be cheaper than borrowing in Nigeria. If Nigeria is borrowing at 7%, then at a minimum, other institutions will borrow at approximately 10% plus the additional higher cost of insuring your debt. No underwriter will underwrite a bonds issue without expecting insurance. If Western nations are paying insurance, then Nigerian institutions will pay higher insurance costs.

Obviously there is a difference between Corporate bonds and government (sovereign bonds in this case)! As I stated in my post 7% would be a benchmark not necessarily the rate at which corporate institutions would be able to issue their bonds. In Nigeria today, corporate bonds are virtually non existent given that government bonds are already at around 14% and these are more or less risk-free, at what rate would corporate bonds then be issued to compensate for the much more higher risk? So I won't expect this to be any different with international bonds i.e. there will definitely be a rate/price differential between sovereign and corporate bond issues originating from the same country!

Borrowing on the international market would definitely be cheaper than borrowing in Nigeria even with all the attendant cost you mentioned, that’s a no brainer really, even a new player in the finance scene in Nigeria would tell you that. Banks in Nigeria are still clamouring to attract international funds to finance big ticket projects and for onward lending to their customers for mortgages etc. Bank of England base rate is 0.5%, US Fed's is 0 – 0.25% and our own CBN's is 6.25% so how did you arrive at you conclusion??

Finally, you having a different opinion or understanding on an issue is fine, but you then subsequently calling someone else's crap is out of order, especially as it is obvious now that you are the one who don't have your facts right.

time will tell but the majority argument is showing other wise.

where and how can we get access to the bonds,

Ma_J_Blige:

I pity you if this is what you have turned this into.

Look, life is not as difficult as you are making it to be- for one, I wasn't referring or arguing or even commenting to you or on your inputs, whether right or wrong.

Look- take life easy. Today you are alive, arguing, cursing and abusing who hasn't done anything wrong to you rather than having a different opinion to what you hold, tomorrow you are no more, dead, gone, spat at and buried forever- then, those who u have belittled and spat at, cursed and abused will still be the one reading about your obituary and asking God to keep your soul at peace. How can the soul be at peace who has refused to be at peace with all men?

I sincerely pity you.

Mary i have read all you have put down and i can say you spew absolute trash and need to accept the fact you are not knowledgeable enough to even argue on this topic. I don't even want to complicate issues further by repeating what 4play had said all along but i appeal to you, please shut the "monkeys" up.

This thread seems to be riddled with individuals trying to show how much they know (or do not know as the case may be) Thanks to the clarification we at least know that the coupon rate for Ghana and Gabon were higher so the official who claimed "better rates" wasn't ignorant per se.

Secondly the purpose of the bond must not be forgotten- its to set a benchmark for Nigerian eurobonds and enable the building of a yield curve so investors can properly price risk. The domestic market already has a good yield curve and it is enabling the growth of the corporate bond sector with the recent issues by Flour mills and UAC with more in the pipeline. This issue is indeed puny but its purpose was clear and future issues both corporate and sovereign can now have a benchmark with the difference in yields determined by tenure and risk perception.

As to whether it was successful or not I think we need to put it in perspective. If the objective was to test the waters and set a benchmark rate then this has been achieved. It would have been worse if it was under-subscribed then it would really have been a flop. As per the reasons for some not investing because of ECA depletion, we conveniently forget that that ECA is illegal and there is a bill for a sovereign wealth fund to replace it which for me makes sense. I rest my case.

ADint:

Obviously there is a difference between Corporate bonds and government (sovereign bonds in this case)! As I stated in my post 7% would be a benchmark not necessarily the rate at which corporate institutions would be able to issue their bonds. In Nigeria today, corporate bonds are virtually non existent given that government bonds are already at around 14% and these are more or less risk-free, at what rate would corporate bonds then be issued to compensate for the much more higher risk? So I won't expect this to be any different with international bonds i.e. there will definitely be a rate/price differential between sovereign and corporate bond issues originating from the same country!

Borrowing on the international market would definitely be cheaper than borrowing in Nigeria even with all the attendant cost you mentioned, that’s a no brainer really, even a new player in the finance scene in Nigeria would tell you that. Banks in Nigeria are still clamouring to attract international funds to finance big ticket projects and for onward lending to their customers for mortgages etc. Bank of England base rate is 0.5%, US Fed's is 0 – 0.25% and our own CBN's is 6.25% so how did you arrive at you conclusion??

Finally, you having a different opinion or understanding on an issue is fine, but you then subsequently calling someone else's crap is out of order, especially as it is obvious now that you are the one who don't have your facts right.  

I apologise for the language in the first sentence of my post to you. I meant no offense.

Secondly, it appears that you are confusing Bank base rate with interest (coupon) on bonds.

What I dont seem to understand is- if major fund managers have said the bonds are too risky an investment, who exactly is responsible for this soo called oversubscription?? are they gassin?? can they gas? is there a way of knowing who the major bond holders are?

kulutempa:


I think a point of correction is in order here.  The Ghana 10 year sovereign bond issue was for $750 million and the bonds were sold to foreign investors in  late September 2007 at a coupon (yield) of  8.50%.  The Gabon issue was for $1 billion and was sold in December 2007 at a coupon of 8.20%.  These are the respective links for both issues.   http://news.myjoyonline.com/features/200710/9801.asp     http://www.whitecase.com/press_12132007/

On this basis it would appear that the Nigeria issue was  quite  successful, given the current uncertain political atmosphere in the country and the opaqueness of the country's finances.  The yields quoted in the comments above are current market yields for the Ghanaian and Gabonese bonds whose  terms are now just under 7 years, and therefore cannot be used as a basis for comparison to the Nigerian bond issue.  At the same time  shorter dated bonds,  tend to have lower yields than longer dated bonds in the bond market.  I hope this clarifies the position for Nairalanders.

I have different rates from the Financial Times; I am more inclined to believe the rates quoted by the FT than a Ghanian website called myjoyonline.

'But D country has lost some of its lustre for investors, as worries have increased over its fiscal prudence and falling foreign exchange reserves.

Dat explains why Nigeria’s first sovereign bond issue has not seen the strong demand that it might have attracted even a few months ago, they say.

Bankers expect to set a cost of borrowing for 10-year bonds, which will be priced on Friday, at about 7 per cent, higher than comparable debt of other sub-Saharan countries. The 10-year bonds of Gabon and Ghana are currently trading at 5.5 per cent and 6.3 per cent respectively.

One investor said: “We met the Nigerians and we were not very impressed. We have seen too much fiscal slippage. The lack of transparency in Nigeria’s finances is a problem. We are not buyers of this deal.”

Other investors cite potentially destabilising presidential elections in April as another reason to stay on the sidelines.

Bankers insist the deal will still attract the targeted $500m. The growth of the private sector, banking reforms and the fact the country is rich in resources still make its debt attractive to some investors.

Others say the yields of 7 per cent also make it a worthwhile investment. One said: “This is not German or US debt. People who want to buy into Nigeria realise this. It is still rated junk and is not risk free.” Nigeria is rated B+ by Standard & Poor’s, four levels below investment grade.'

www.ft.com
I can't post the complete URL for privacy reasons.

queensmith:

What I dont seem to understand is- if major fund managers have said the bonds are too risky an investment, who exactly is responsible for this soo called oversubscription?? are they gassin?? can they gas? is there a way of knowing who the major bond holders are?

Private investors looking for good returns.

Katsumoto:

Private investors looking for good returns.

o, ok- are the investors based in Nigeria?

Katsumoto:


www.ft.com
I can't post the complete URL for privacy reasons.

thats what i was tellin the dude that posted the link! he better remove it fas fas!

queensmith:

o, ok- are the investors based in Nigeria?

Agange stated the investors are from 18 different countries. I wont be surprised if there are Nigerians amongst them.

Katsumoto:

I have different rates from the Financial Times; I am more inclined to believe the rates quoted by the FT than a Ghanian website called myjoyonline.

'But D country has lost some of its lustre for investors, as worries have increased over its fiscal prudence and falling foreign exchange reserves.

Dat explains why Nigeria’s first sovereign bond issue has not seen the strong demand that it might have attracted even a few months ago, they say.

Bankers expect to set a cost of borrowing for 10-year bonds, which will be priced on Friday, at about 7 per cent, higher than comparable debt of other sub-Saharan countries. The 10-year bonds of Gabon and Ghana are currently trading at 5.5 per cent and 6.3 per cent respectively.

One investor said: “We met the Nigerians and we were not very impressed. We have seen too much fiscal slippage. The lack of transparency in Nigeria’s finances is a problem. We are not buyers of this deal.”

Other investors cite potentially destabilising presidential elections in April as another reason to stay on the sidelines.

Bankers insist the deal will still attract the targeted $500m. The growth of the private sector, banking reforms and the fact the country is rich in resources still make its debt attractive to some investors.

Others say the yields of 7 per cent also make it a worthwhile investment. One said: “This is not German or US debt. People who want to buy into Nigeria realise this. It is still rated junk and is not risk free.” Nigeria is rated B+ by Standard & Poor’s, four levels below investment grade.'

www.ft.com
I can't post the complete URL for privacy reasons.

Here is another link for the Ghana bond issue culled from the African Development Bank's African Economic Outlook report for 2008. It again confirms that the yield at issue in 2007 is 8.50%
http://books.google.co.uk/books?id=mnyUL7Fql0MC&pg=PT341&lpg=PT341&dq=ghana+sovereign+bond+issue+2007&source=bl&ots=75W3Kwda8g&sig=yK4F2d2USuWqG8uYH85E120U4f0&hl=en&ei=Aq48TdOnJc-JhQeGy9TNCg&sa=X&oi=book_result&ct=result&resnum=2&ved=0CCQQ6AEwATgU#v=onepage&q=ghana%20sovereign%20bond%20issue%202007&f=false

Katsumoto, the FT yields are current market yields not the ones at the issue date. As I said those bonds now have shorter terms than the Nigerian issue hence their lower yields. It is all about something called the time value of money, and you will most likely find the Nigerian bonds trading at lower yields in 3 years time, just like the Ghanaian bonds.

Katsumoto:

I apologise for the language in the first sentence of my post to you. I meant no offense.

Secondly, it appears that you are confusing Bank base rate with interest (coupon) on bonds.

It's all good.

I am aware of the difference between base rate and coupon rates. I brought in base rates as you referred to borrowing on the international market and bonds are just one of the many options available. Ultimately, there is some correlation between base rates and the price/cost of different debt/financing instruments etc, being sourced from a particular country or region.

So in essence, I don’t see how it would be possible for any kind of like-for-like finance (even plus other cost) to be cheaper in Nigeria with base rate at 6.25% than in the West with base rates below 1%.

kulutempa:

Here is another link for the Ghana bond issue culled from the African Development Bank's African Economic Outlook report for 2008. It again confirms that the yield at issue in 2007 is 8.50%
http://books.google.co.uk/books?id=mnyUL7Fql0MC&pg=PT341&lpg=PT341&dq=ghana+sovereign+bond+issue+2007&source=bl&ots=75W3Kwda8g&sig=yK4F2d2USuWqG8uYH85E120U4f0&hl=en&ei=Aq48TdOnJc-JhQeGy9TNCg&sa=X&oi=book_result&ct=result&resnum=2&ved=0CCQQ6AEwATgU#v=onepage&q=ghana%20sovereign%20bond%20issue%202007&f=false

Katsumoto, the FT yields are current market yields not the ones at the issue date. As I said those bonds now have shorter terms than the Nigerian issue hence their lower yields. It is all about something called the time value of money, and you will most likely find the Nigerian bonds trading at lower yields in 3 years time, just like the Ghanaian bonds.

^^Spot on. Market confidence, availability of other 'prime' opportunites e.g Nigeria's new eurobond issue   could have also played a part in bringing down the current yield on the Ghanaian bond.

kulutempa:

Here is another link for the Ghana bond issue culled from the African Development Bank's African Economic Outlook report for 2008.  It again confirms that the yield at issue in 2007 is 8.50%
http://books.google.co.uk/books?id=mnyUL7Fql0MC&pg=PT341&lpg=PT341&dq=ghana+sovereign+bond+issue+2007&source=bl&ots=75W3Kwda8g&sig=yK4F2d2USuWqG8uYH85E120U4f0&hl=en&ei=Aq48TdOnJc-JhQeGy9TNCg&sa=X&oi=book_result&ct=result&resnum=2&ved=0CCQQ6AEwATgU#v=onepage&q=ghana%20sovereign%20bond%20issue%202007&f=false

Katsumoto, the FT yields are current market yields not the ones at the issue date.  As I said those bonds now have shorter terms than the Nigerian issue hence their lower yields.  It is all about something called the time value of money, and you will most likely find the Nigerian bonds trading at lower yields in 3 years time, just like the Ghanaian bonds.

The current yield is the market value of the bond. The current yield is what is relevant because it takes into consideration the coupon rate, current rate of similar bonds, and the present value of the principal. You cannot compare the coupon rate of a band that was issued three years ago with a bond issued today because the market as at today determines the value of all bonds. That is why the FT compared Nigeria's rate as at Friday with Ghana and Gabon's current yield as at Friday.

Bonds may sell for more or less the par value (usually $100) and the price of bonds moves in the opposite direction of interest rates. If interest rates go down, the price of the bond will go up and vice versa. The current yield is determined by the annual interest payment divided by the price of the bond. From your article, we know that the annual interest payment on a Ghanian $100 note is 8.5% and from the FT we know that the current yield is 6.3%. So we know that the current price of the bond is £134.92 (premium) which is higher than the par value ($100) of both Ghanian and Nigerian bills. Conversely, if the interest rate had increased to 10%, the Ghanian $100 note will be valued at $85 (Discount).

So on Friday, you will have paid $100 to buy a $100 Nigerian note and have the right to a coupon rate of 7%. On that same day, you will have paid $134.92 for a $100 Ghanian note and have the right to receive a coupon rate of 8.5%. Notice that the market has adjusted the price of both notes as well as the yield accruing to the investor. The key thing here is that the interest rate (coupon rate) is set by the market. So an investor will receive higher returns on the Nigerian note to reflect the 'risk'.