Nigeria’s Securities and Exchange Commission (SEC), has approved the African Development Bank’s AfDb’s application to establish a N160 billion medium term note programme in the Nigerian capital market.
The AfDB is being advised on the transaction by Stanbic IBTC Capital (a member of the Standard Bank Group) and Rand Merchant Bank Nigeria, a wholly owned subsidiary of the FirstRand Group.
The SEC’s approval also included a “No-Objection” for the AfDB to commence the book-building process for a planned issuance of a first tranche of N16.2 billion under the programme.
The Bank would seek to start the book-building process as soon as mid-June, with the plan to issue by the end of the month, subject to favourable market conditions.
Members of the Bank’s treasury team were recently in Nigeria to sound the market for the upcoming issuance, where they received positive feedback; institutional investors were looking forward to adding diversity to their portfolios and welcomed the AfDB’s proposed offering.
The proceeds of the first bond issuance would be used to finance a line of credit to a financial institution which would on-lend to corporates in the services and industries sector; a pipeline of infrastructure projects; and to small and medium sized enterprises (SMEs).
“In line with its’ Local Currency Initiative, the Bank approves African currencies as lending currencies whenever there is sufficient demand for local currency loans, and where the Bank can fund itself cost-effectively.
“This initiative allows the Bank to establish medium term note (borrowing) programs in designated African currencies (including the naira which was designated a lending currency of the Bank in December 2012); and to issue local currency bonds within the framework of the program and in line with underlying demand from the Bank’s borrowing clients,” it explained.
The Bank’s N160 billion programme would be used to finance a growing pipeline of projects requesting loans in Nigerian naira in the following sectors: infrastructure, services and industries, and financial sector.
According to the statement, SEC had welcomed the AfDB’s initiative, citing the importance of “supranationals engaging in domestic markets as it provides a signalling effect that the market is ready for more global investors and issuers.
“Moreover Supranationals encourage the development of domestic markets by introducing global market practices, namely best practices in documentation, and information disclosure requirements.
“Supranationals issuing in domestic markets also facilitate the creation of a new asset class for domestic investors allowing for diversification of their portfolios,” it added.