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IFC set to issue naira bond in Nigeria

A member of the World Bank Group, the International Finance Corporation (IFC), is to issue a US$50 million, local currency (Naira) bond to support domestic capital market and increase access to local-currency finance in Nigeria, according to an IFC statement

The statement, quoted Thursday by the private Guardian newspaper, said the “Naija bond” would be the financial institution’s first Naira-denominated bond and the first of such placement by a non-resident issuer in the country’s domestic market.

IFC’s Vice-President and Treasurer Jingdong Hua said in the statement that “vibrant domestic capital markets are the foundation for lasting growth and in Africa, they can mobilise capital to close the financing gap for key sectors such as infrastructure and housing.

“The IFC Naija bond will be a milestone achievement as we continue to work with governments and local authorities to strengthen domestic capital markets in the region.

“A lot of our SME (small and medium size enterprise) customers generate local currency revenue. We’d like to lend to them in local currency so they can really focus on growing their business, instead of worrying about foreign exchange volatility.”

Bond is a financial instrument used to raise long term funds to finance medium to long term projects like infrastructure.

With the interest shown by the IFC in the Bond market, analysts are of the view that the domestic market, which is currently dominated by the governments, will be further deepened .

Naija bond is also targeted at investors like pension funds, insurers, asset managers and banks, that seek to diversify their portfolio, while investing in high-quality assets.

IFC bonds are rated triple-A by renown international rating companies-Moody’s Investors Service and Standard & Poor’s. IFC’s portfolio to date in Nigeria is put at US$1.1 billion, which is ranked as the largest country portfolio in Africa and the eighth-largest globally.

In May 2012, IFC launched its Pan-African Domestic Medium-Term Note Programme, which focuses on Botswana, Ghana, Kenya, Namibia, Rwanda, South Africa, Uganda, and Zambia. It has also obtained approvals to issue local-currency bonds in Kenya.

Already, IFC had worked with Ghana, Zambia, and eight members of the West African Monetary Union to establish local-currency bond programmes, like in 2006 and 2009, when it issued bonds denominated in CFA francs.

As of 30 June 2012, IFC outstanding bond issuance was put at US$45 billion in 11 currencies.

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