Nigeria Leads eurobond in Africa

(Barney Jobson, ft) There’s a race on to issue the next eurobond in Africa – and it looks like Nigeria has just edged into the lead. The west African heavyweight, famous for its oil and its in-your-face dysfunctionality, has just appointed Citigroup and Deutsche Bank as bookrunners for its debut sale of a $500m bond.

Foreign investors keen on Africa have been waiting for the 10-year bond since before the global financial crisis. Now it is due before the end of the year. It’s likely to become another popular pit stop in the hunt for high yields – and the money in that game could rise if the US Federal Reserve’s anticipated QE2 boosts global liquidity more than it boosts the US economy itself.

Olusegun Aganga, Nigeria’s finance minister, told Reuters:

It was keenly contested … but in the end these two, Deutsche Bank and Citigroup, emerged the two bookrunners … One very strong house in Europe … and one very strong house in the United States, that is how we split it.

Aganga, who used to be a managing director at Goldman Sachs in London, said there was enough interest for the country to be able to raise $1bn, but that it was not inclined to go above the planned $500m.

Other African countries that have revived planned eurobond debuts since the financial crisis receded include Senegal, Kenya, Zambia and Angola. But they are also aware that foreign investor sentiment on Africa is still more fragile than it was in, say, 2006.

Last month Aganga said he expected the yield on Nigeria’s planned bond to be lower than nearby Ghana’s, which was trading at a yield of 5.976 percent on Wednesday. That is not far off the lowest level since it was issued in 2007.

Nigeria’s bond will serve as a benchmark that could enable Nigerian corporates and state governments to start issuing eurobonds too. It will also help set a  yield reference point for Angola, another big oil producer keen to tap international investors, but one that has a much worse record on transparency than Nigeria.