Akinwuntan, Ecobank MD Backs FG’s $6.2bn Eurobond
The Managing Director, Ecobank Nigeria, Patrick Akinwuntan has lauded Federal Government’s plan for a Eurobond issuance in the International Capital Market (ICM), describing it as a step in the right direction.
Akinwuntan’s support is drawn from the belief that the fundamentals and potentials of the nation’s economy are strong to meet its debt obligations.
The Federal Government had last week announced plans for a Eurobond issuance at the international capital market (ICM) to raise $6.2 billion for financing the budget.
The Debt Management Office (DMO) explained that the issues for which all statutory approvals have been received are for the purpose of implementing the New External Borrowing in the 2021 Appropriation Act. Proceeds are to finance the various projects in the Act.”
Eurobond issuances are debt instruments denominated in a different currency than the local one of the country where the bond is issued.
However speaking on the government’s Eurobond issuance, Akinwuntan, who was assessing the global market as Nigeria makes its announcement of multi billion-dollar Eurobond offering, said the economy is showing strong trends owing to investments in infrastructure such as road and rail transportation which is giving a lot of positive impact to the overall economy, adding that the private sector is also making remarkable improvement in the power sector, telecoms, and information technology.
According to him, “You look at the fundamentals, what is the story of this economy? You look at Nigeria, the fundamentals are strong, coming from the lessons learnt in being a mono-product economy that was dependent on oil. We have since embarked on the journey of diversification and we are beginning to show early fruits. Exports are improving, Africa Continental Free Trade Area (AfCFTA) provides the opportunity to expand that even further. So, you look at the fundamentals, look at the openness of the economy, the transparency of reporting and look at the opportunities to enhance real growth, output, capacity improvements and stability of policies. All these are factors to look at with a view of participating in the economy like that of Nigeria.”
He observed that international borrowing will allow Nigeria as a country to access more foreign currencies, deepen external reserve, allows more confidence in the medium-term planning in the private sector, adding that it allows a benchmark to be established in terms of how funding and investment are priced within the local economy.
“It also gives more room for the local economy to be able to breathe a bit more because when the country takes on Euro bond that portion is reduced from local country financing or public sector debt within the country. All these factors play strongly to the benefit of the private sector and the entire economy at large.”
The last two quarters have seen the global market rebounding from the very deep end of the covid-19 that plagued 2020. Since the arrival of vaccines, there has been a gradual opening of the global economy such that there is much more optimism now in the market because lessons have been learnt that shutting down the economy is not the best way to handle an epidemic. There have also been supports from sovereigns ensuring that there is steady growth within the various economies; the supply chain has opened and the sub-Sahara Africa has shown renewed interest in the Eurobond market in the international debt market. Also, the Benin Republic, Ghana, Cote d’Ivoire and Kenya are all approaching the market with significant success.
Oversubscription in each of them ranges from 200 per cent to 300 per cent and an all high in Kenya close to 600% or six times oversubscription. This is a positive period for major economies like Nigeria, which is the lead economy in Africa, to take advantage and invite the global community to hear our story, invest in us and get good returns.”
Citing example with Ecobank’s $300 million Eurobond offer earlier in the year which was over-subscribed by 300 per cent, Akinwuntan advised those approaching the international debt market to have clarity of purpose and state clearly their strengths and weaknesses.
“We are the first banking entity in Africa to do that in 2021 and it comes from our long-term planning in the economy of Africa; we are the pan African bank and when we look at Africa, Nigeria is a major player. Quickly we understood that arising from a scenario of pandemic and all-time lows of 2020 is time to look at the brighter side and we stepped out for the $300m US Eurobond offer which met a positive response from investors across the globe within the country”.
“We attracted more than three times in subscription. But we kept to the book of doing $300m because it is based on our plan in participating in positioning Nigeria, as the leading export country in the AFCTCA environment in the continent and giving our unique position as the Pan African bank, it was very clear to us and the market responded positively. Our experience also tells us that, what is critical is to have clarity on your strength, be very frank about your weakness or the areas of concern and how you intend to handle that positively.”
