LAGOS/LONDON (Reuters) – Nigeria will likely have to pay around 6 percent for a 10-year maturity on its $1 billion Eurobond if it goes ahead with the issue after a debt meeting with investors next week, an analyst and a fund manager said on Wednesday.
Senior Nigerian government officials led by Finance Minister Ngozi Okonjo-Iweala started a one-week roadshow to Britain, Germany and the United States on Wednesday with book-runners for the Eurobond, with a view to issuing it this year.
The timing of the bond and its maturity have not been decided yet and will depend on the market, a London-based fund manager who attended the roadshow told Reuters, asking not to be named.
Nigeria’s debt office had said it wanted to sell the bond by end-September and that it was increasing the amount it borrows overseas to lower funding costs.
Deutsche Bank and Citigroup are acting as book-runners for the Eurobond.
“If they went for a 10-year they could get one in the region of 6 percent,” said the fund manager, adding that Nigeria may hold back on the sale to minimise the yield.
Yields on emerging market debt have risen sharply over the past six weeks owing to lingering concerns that major central banks may start to back off loose monetary policies that kept global markets awash with cash.
Yields on Nigeria’s 10-year domestic bond spiked nearly 3 percent this month while stocks and the naira tumbled last week, as foreign investors dumped frontier market assets.
“Nigeria is likely to pay a higher yield to launch its second Eurobond than the external funding cost that it would have secured a couple of months ago,” said Samir Gadio, emerging market strategist at Standard Bank.
However, Gadio said he thinks Nigeria will still be able to issue the new bond at a lower yield than the 7 percent its $500 million debut Eurobond fetched in January 2011.
That 10-year paper is now yielding 5.2 percent, up sharply from 4 percent on May 1 and 3.3 percent above U.S. Treasuries.
The U.S. Federal Reserve will meet on Wednesday and if it gives an indication that quantitative easing is to continue, that could support emerging markets and see bond yields fall.