Nigeria’s debt capital markets are proving resilient in a challenging environment. Confidence building over the last few years and strong market liquidity has resulted in noteworthy transactions from previously unrepresented sectors. However, there is still a lot of room for growth.
This was reinforced at the Fourth Annual Bonds, Loans and Sukuk program, the country’s only credit market event featuring various issuers, investors, regulators and business leaders which was held recently in Lagos and sponsored by Rand Merchant Bank (RMB). RMB recognizes the importance of sponsoring these programs, not just within Nigeria but in other parts of the world in order to bring thought leaders together to debate the current state of the Debt Capital Markets and how together we could proffer solutions that would catalyze development and deepen the markets thereby leading to further sustainable growth.
Speaking at the event, Deputy Chief Executive Officer and Head, Investment Banking, RMB Nigeria, Dalu Ajene said that the Nigerian Debt Capital Markets remains burgeoning as investors continue to show interest in many sectors, such as power, telecommunications and financial services.
Ajene explained: “Nigeria’s debt capital markets proved resilient in a challenging environment over the past year as noteworthy transactions have contributed to the steady development of the Nigerian market”. RMB, he said, would continue playing an important role as an intermediary in the debt capital markets and as a facilitator of transactions by working closely with issuers, investors as well as regulators.
Senior Transactor, DFG, RMB Nigeria, Ikechukwu Omeruah, said: “The Annual Bonds and Loans Sukuk Conference provides an avenue for all stakeholders of the debt markets – issuers, borrowers, advisers, investors, lenders, and regulators to meet and discuss ways we can further develop our markets”.
“The opportunity to understand the requirements of prospective issuers and discerning whether it is optimal to access the markets to issue in local or foreign currency is important. In addition, understanding what the investors are looking for in terms of tenor and yield are also very essential factors,” he said. In view of this, we ensure that we connect the investors with opportunities they want to look at, the type of deals they want to see and make sure there is a match in risk appetite and return expectations.
RMB’s Ikechukwu moderated a panel that offered a perspective on successfully launching a capital market transaction. The panel illuminated prospective first time Nigerian issuers on the process of raising capital via the issuance of debt securities through both the Nigerian and International Debt Capital Markets. The panel included Finance Executives of first-time issuers from the Power, Fintech and Oil & Gas sectors, who were able to speak to very recent experiences from accessing the capital markets. The panellists spoke in detail on: the benefits of establishing a Debt Issuance Programme, various means of ensuring an efficient time to market, how to position a first-time issuer to local and foreign investors (including the various mediums that could be used to develop a relationship with investors), and how debt is priced in the markets.
To demonstrate RMB’s active participation in the bonds market, the following significant transactions were concluded during the course of the year.
IHS Towers Group
RMB, acting as a joint bookrunner and initial mandated lead arranger and underwriter (alongside 5 other banks) concluded a USD1.8 billion landmark debt financing package for IHS Towers Group (“IHS”). The debt package included a USD1.3bn High-yield Eurobond issuance made up of 5.5-year and 8-year tranches and Dual-currency facility – USD390mn 5-year term loan in Naira and a USD110mn 5-year term loan in USD. IHS is the largest Tower company in the EMEA region and holds the number one market position by tower count in all the jurisdictions in which it operates, including Nigeria, Cameroon, Cote d’Ivoire, Rwanda and Zambia.
Dangote Cement Plc
Rand Merchant Bank Nigeria Limited (“RMBN”) acting as a Dealer, assisted Dangote Cement Plc (“DCP”) in raising NGN50bn via a dual series Commercial Paper (“CP”) issue in December 2019. The transaction involved the issuance of the Series 13 and 14 CPs, priced at 7.75% and 8.50% respectively under DCP’s NGN150bn CP Programme. The initial plan was to raise up to NGN45bn but due to market appetite the order book was over 1.1x subscribed so the issuer opted to upsize the issue to NGN50bn.
Africa Finance Corporation
RMB, in April 2019, together with four other Joint Lead Managers (“JLM”), arranged the USD650mn 7-year RegS/144a Eurobond issuance on behalf of Africa Finance Corporation (“AFC”) in tandem with a liability management exercise of USD375mn, Fixed-Price Tender Offer for their April 2020 Eurobond.
RMB assisted AFC again in October 2019, acting as a JLM in arranging the issuance of USD500mn 10-year RegS Eurobond. This was a major achievement as AFC was able to extend tenor for the first time to 10 years and attract a deep and diverse pool of investor interest with an order book 2.2x subscribed despite the issuance being limited to Non-US based investors.
Federal Government of Nigeria Series 2 Green Bond
RMBN acted as a Joint Financial Adviser/Bookrunner on the NGN15bn Senior Unsecured Fixed Rate Series 2 Green Bond (the “Green Bond”) issued by the Federal Government of Nigeria on June 13, 2019. The tenor of the Bond is 7 years (matures in June 2026), and was priced at 14.50% p.a.
The proceeds of the Green Bond went towards financing projects covered by the 2018 Appropriation Act which will contribute to Nigeria’s commitments to the Paris Agreement on Climate Change. The focus areas of the projects include: Off-Grid Solar and Wind Farm Energy, Irrigation, Mass transit, Afforestation, Reforestation and Ecological Restoration.