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GEJ's Reckless Spending Causes Investors To Shun Nigeria’s $500 Million Eurobond - Investment - Nairaland

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Shekau's Death Will Attract Foreign Investors To Nigeria / Investors Shun Nigeria’s $500 Million Eurobond / Nigeria’s $500m Eurobond Yield More Than Ghana’s,jp Morgan Implies (2) (3) (4)

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GEJ's Reckless Spending Causes Investors To Shun Nigeria’s $500 Million Eurobond by debosky(m): 5:13pm On Jan 21, 2011
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 w[b]orries about how President Goodluck Jonathan’s government has run the excess crude account, designed to store up windfall oil revenues.’’[/b]

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.
Re: GEJ's Reckless Spending Causes Investors To Shun Nigeria’s $500 Million Eurobond by 10cirenoh: 5:19pm On Jan 21, 2011
Ewwoooo see money, oya GEJ start to dey spend, spend like pikin wey never see fried chicken for eyes before.


GEJ, DON'T EAT AWAY OUR FUTURE OOOOO shocked shocked shocked shocked angry angry angry angry angry angry
Re: GEJ's Reckless Spending Causes Investors To Shun Nigeria’s $500 Million Eurobond by latch(m): 10:46am On Jan 22, 2011
20 billion to 400 million , on what?
Re: GEJ's Reckless Spending Causes Investors To Shun Nigeria’s $500 Million Eurobond by omanzo02: 11:40am On Jan 22, 2011
My friend, please get your fact right, the bonds were enthusiatically well received and oversubscribed.


http://www.reuters.com/article/idUSLDE70K12220110121?loomia_ow=t0:s0:a49:g43:r1:c0.391304:b41172416:z0
Re: GEJ's Reckless Spending Causes Investors To Shun Nigeria’s $500 Million Eurobond by maxell(f): 4:45pm On Jan 22, 2011
omanzo02:

My friend, please get your fact right, the bonds were enthusiatically well received and oversubscribed.


http://www.reuters.com/article/idUSLDE70K12220110121?loomia_ow=t0:s0:a49:g43:r1:c0.391304:b41172416:z0

Earlier reports were that the issue was under-subscribed. Later on, they report that the bonds
were actually over-subscribed by 2.5 times ($1.5 billion).

So you are both right; the news media outlet are to blame wink
Re: GEJ's Reckless Spending Causes Investors To Shun Nigeria’s $500 Million Eurobond by jamace(m): 5:59pm On Jan 22, 2011
Earlier reports were that the issue was under-subscribed. Later on, they report that the bonds
were actually over-subscribed by 2.5 times ($1.5 billion).

So you are both right; the news media outlet are to blame wink


Wrong on the highlighted. This OP has grudges against GEJ and his govt, and that informed the title of his thread "Re: GEJ's Reckless Spending Causes Investors To Shun Nigeria’s $500 Million Eurobond". He is a GEJ's failure seeker.

I'm sure the OP will be disappointed by this: https://www.nairaland.com/nigeria/topic-590664.0.html grin grin

Bad belle people! shocked shocked
Re: GEJ's Reckless Spending Causes Investors To Shun Nigeria’s $500 Million Eurobond by Tsiya(m): 6:37pm On Jan 22, 2011
Why do we even need to issue bonds? Aganga came with his Goldman Sach ideology that every government must issue bond to international investors. But issuing bond is literary going into debt. So instead of going to National Assembly to get permission for borrowing, now they want to start selling bonds to international financiers, who will continue milking us and our great great grand children. What do we need the money for? They should tell us what they are going to do with the money they raised from capital market? Europe is crumbling. Portugal, Ireland, Italy, Greece, Spains are all in huge economic conundrum as a result of selling bonds to investors.

I wish nobody buy the bonds. But heck, who is a fool? After the last time, the Paris club raked nearly $18Bn for giving us $3Bn and therefore anybody will buy Nigerians bonds. We are oil producing country and we always pay our debts.
Re: GEJ's Reckless Spending Causes Investors To Shun Nigeria’s $500 Million Eurobond by 4Play(m): 10:34pm On Jan 22, 2011
Why do we even need to issue bonds?

It's supposed to serve as a benchmark. I don't think we need the money. The idea is that it serves as point of reference in assessing Nigeria's credit worthiness. For me, it's been disappointing.
Re: GEJ's Reckless Spending Causes Investors To Shun Nigeria’s $500 Million Eurobond by snowdrops(m): 10:47pm On Jan 22, 2011
Elections are around the corner. Politicians need excuse to steal money.
Re: GEJ's Reckless Spending Causes Investors To Shun Nigeria’s $500 Million Eurobond by Beaf: 10:48pm On Jan 22, 2011
The bond is extremely successful:

[size=14pt]UPDATE 5-Nigeria's debut Eurobond heavily oversubscribed[/size]
Fri Jan 21, 2011 8:16pm GMT  
(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.
The 10-year bond was priced in line with Nigeria's 7.0 percent guidance and will pay a 6.75 percent coupon, with settlement on Jan. 28, Thomson Reuters news service IFR said.

The pricing means investors demanded a premium to West African peer Ghana, whose 8.5 percent Eurobond due 2017 is currently yielding around 6.2 percent.

While demand for high-yielding assets, the paucity of West African credit and the relatively low volume of the issue had been expected to fuel appetite, some potential investors were put off by the rapid depletion in Nigeria's oil savings.

Fitch assigned the issue a 'BB-' rating on Friday, saying low debt ratios and robust growth played in Nigeria's favour, but also noting concern about a decline in reserves last year despite a rise in oil prices and production.

"Reserves have risen around $1 billion since the end of 2010, but in the absence of fundamental institutional reforms on the usage of oil revenues and savings, this gradual build-up is unlikely to be sustained," Fitch said.

Standard & Poors has assigned a 'B+' long-term senior unsecured debt rating to the issue.

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.


VANISHING SAVINGS
Nigeria's excess crude account (ECA), into which it saves oil revenues above a benchmark price, has dwindled to less than $1 billion from $20 billion at the start of the current presidential term four years ago.

Foreign reserves, of which the ECA is a part, inched up month-by-month to $33.5 billion by mid-January but are still down more than a quarter on year-ago levels.

Nigeria has shrugged off the concerns, saying the spending was needed to defend the naira currency against increased dollar demand, fund projects in the power sector, and provide seed funding for a planned sovereign wealth fund, which should form a firmer legal basis than the ECA for safeguarding oil savings.

Central Bank Governor Lamido Sanusi told Reuters late on Wednesday he believed the fall in reserves would end as the country's banking sector gets back on its feet after a 2009 bailout and as oil production and prices rise.

"We had to draw on forex (reserves) to meet elevated (dollar) demand levels as we couldn't risk an accelerated exit from quantitative easing while banking reforms were still at initial stages," Sanusi said.

"Now with monetary tightening, higher yields, a recovering equity market ,  and progress on banking resolution, a higher oil price and stable output, my sense is that the reserve attrition will stop," he said.

The point of the Eurobond issue is to set a benchmark yield curve for Nigeria in the global market, rather than to raise funds, meaning the country has ample room to repay investors.

Standard Bank analyst Samir Gadio pointed out Nigeria's foreign reserves were 67 times the Eurobond size and that its external debt-to-GDP ratio was just 2.3 percent.

"Overall, the risk of default on the Eurobond is marginal," he said in a research note. (For more Reuters Africa coverage and to have your say on the top issues, visit: af.reuters.com/ ) (Additional reporting by Sujata Rao-Coverley in London, John Weavers of IFR; Writing by Nick Tattersall; Editing by )


http://af.reuters.com/article/nigeriaNews/idAFLDE70K12220110121?sp=true
Re: GEJ's Reckless Spending Causes Investors To Shun Nigeria’s $500 Million Eurobond by rasputinn(m): 11:26pm On Jan 22, 2011
@ Debosky

Which Eurobond are you referring to? hope not the same one that was HEAVILY over-subscribed?
Please stop referring to next newspapers,they seem to be on a mission to outdo sahara reporters in the area of sensational journalism,so always take their "stories" with a pinchspoonfull of salt

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