After receiving the Securities and Exchange Commission ( SEC ) of Nigeria s approval to establish a NGN 160 billion Medium Term Note (MTN) Programme and No Objection from the SEC to start the book building process on June 6, 2014, the African Development Bank ( AfDB or the Bank ) proceeded to tap the market for its maiden local currency issuance in the Nigerian capital market.
The AfDB launched a 7-year, semi-annual fixed rate coupon bearing bond structured with a 3-year grace period preceding a 4-year amortising profile on principal, introducing a new instrument into the domestic market and adding another issuance into the supranational asset class. The Bank successfully raised NGN 12.95 billion, issuing at a discount of about 75 bps below the comparable reference point on the government yield curve (Federal Government of Nigeria27 Jan 2022) to price at 11.25%. The book building commenced on June 20 with a closing date on July 4 and the settlement of the proceeds occurred on July 11. The AfDB s MTN Programme is the first ever to be established by a supranational issuer in the Nigerian capital market, and the amount raised also represents the largest ever issuance, and also the longest maturity instrument in its asset class to be introduced to the Nigerian market. Acceptance of the issue in the market was also further evidenced and demonstrated by the diverse category of investors to whom the securities were distributed (including pension funds, asset managers, banks and insurance companies).
Pierre Van Peteghem, Treasurer of the African Development Bank Group, outlined the importance and significance of the transaction to the Bank as it marks its inaugural issuance in the Nigerian market, given the size and relative sophistication of this market and Nigeria being the Bank s largest shareholder. He added that issuances in the local markets allow the Bank to lend to its borrowers in local currencies thereby eliminating their currency risks; and to participate in the development of African capital markets by providing a new investment product to the local institutional investors. The Bank s local currency bonds are structured to match the underlying projects to which the Bank will lend the proceeds. The proceeds of the maiden NGN issuance will be lent to a client who will use the funds to finance local SMEs and some infrastructure projects.
This issuance marks the AfDB s third domestic bond issue in Africa, outside of South Africa. The Bank previously issued two local currency bonds in Uganda in August 2012 and May 2013. The Nigerian Naira issuance confirms the AfDB s commitment to launch more local currency bonds across the continent, with proceeds used to provide local currency loans to the Bank s clients.