Nigerian lenders turn to dollar bonds

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Lagos - Nigeria’s drive to increase electricity generating capacity is prompting lenders there to sell dollar bonds to finance power projects.

President Goodluck Jonathan’s government, which sold 15 state-owned power generation and distribution companies last year, is spending $3.5 billion (R37.2bn) to lift capacity this year by 50 percent from 4 000 megawatts.

Funds will come from the sales and borrowing as he seeks to alleviate daily blackouts.

Nigeria’s banks are tapping Eurobond markets to be in a position to provide financing for projects including power, with Sterling Bank seeking to raise dollars after Zenith Bank, the nation’s second-biggest lender, sold $500 million of five-year notes on April 10.

“Nigerian banks will become regular players in the Eurobond market in coming years,” Samir Gadio, an emerging market strategist at Standard Bank’s London unit, said last week. “They will need to refinance existing issues before they mature, but also to raise more funding for the financing of power, oil and gas and infrastructure projects.”

The state’s disposal of its power assets last year attracted about $2.4bn, with most of the financing arranged by local banks, UBA Capital managing director of investment banking Wale Shonibare said last week.

Demand for Zenith’s bonds was more than double the amount on sale, the lender said in a statement on April 17.

Sterling Bank planned to sell a Eurobond next year and would start talks with investors to raise $200m this year, chief financial officer Abubakar Suleiman said last week.

“The amount for the Eurobond has not been determined,” Suleiman said. “It is intended to help the bank finance growth.”

Guaranty Trust, Nigeria’s biggest bank, which raised $400m in November for oil and gas investments out of a $1bn bond programme, has enough short-term dollar funding, according to chief executive Segun Agbaje.

“If we see a long-term funding need we’ll have to raise more funds,” he said in an April 9 interview.

“Nigerian banks don’t have significant excess or idle foreign currency funding partly due to regulations so when the lending opportunities come up, they tend to have to go to the market to raise funds,” FBN Capital analyst Bunmi Asaolu said on April 15. “The risks are there because of foreign-exchange risk and question marks surrounding transmission and gas supply.

“This is why some banks have chosen not to participate in the ongoing lending spree.”

Union Bank of Nigeria, which was bailed out by the central bank five years ago during a debt crisis, was selective with the power deals it funded, chief financial officer Oyinkan Adewale said last week.

“We have to be very, very careful because we know everybody was rushing to finance power, that was the new kid on the block, but a lot of these assets people didn’t really know the quality of,” Adewale said. – Emele Onu and Chris Kay for Bloomberg



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