BREAKING: Nigeria redeems another US$500m Eurobond

Nigeria has redeemed her US$500 million Eurobond she issued in July 2013.

The Debt Management Office (DMO) in a statement on Wednesday night said: “This is part of a dual-tranche US$1 billion Eurobond for a tenor of ten (10) years at a coupon of 6.375% per annum”.

The DMO revealed that “Nigeria had previously redeemed a US$500 million Eurobond in July 2018, another US$500 million Eurobond in January 2021, and a US$300 million Diaspora Bond in June 2022. These, together with the USD500 million”.

According to the DMO, “the Eurobond redeemed today, brings the total amount of securities redeemed by Nigeria in the International Capital Market (ICM) to USD1.8 billion”.

By redeeming this volume of Eurobonds on their due dates the DMO argued that “Nigeria’s successful redemption of its Eurobonds and Diaspora Bond in the ICM over the past six (6) years is a demonstration of its strong debt management operations and planning”.

Redeeming a Eurobond means that Nigeria is repaying the principal amount of the bond along with any outstanding interest payments before or immediately upon the bond’s maturity date.

A Eurobond is a type of bond issued in a currency other than the currency of the country where it is issued. In this case, Nigeria issued a $1.8 billion Eurobond, which means it borrowed $1.8 billion from international investors by issuing bonds denominated in a foreign currency, such as the US dollar or the euro.

When Nigeria redeems a Eurobond, it uses its own funds or obtains new financing to repay the bondholders. Typically, a country redeems a Eurobond by utilizing its foreign exchange reserves, obtaining loans, or issuing new bonds. The repayment process involves returning the principal amount borrowed, along with any interest payments that have accrued (in this case 6.375 percent per annum).

The redemption of a Eurobond affects Nigeria’s total debt profile in several ways. Firstly, by redeeming the Eurobond, Nigeria reduces its overall debt obligations by the principal amount of $1.8 billion. This can help improve the country’s debt sustainability and reduce the burden of servicing the debt.

Secondly, redeeming a Eurobond may have implications for Nigeria’s foreign exchange reserves. If the country uses its foreign exchange reserves to repay the bond, it could deplete its reserves or reduce the buffer it has to support the local currency and manage external obligations.

The redemption of a Eurobond can also impact Nigeria’s creditworthiness and borrowing costs. As Nigeria has successfully redeemed the Eurobond, it can enhance its reputation in international financial markets. This, in turn, may lead to improved investor confidence and potentially lower borrowing costs in the future.

It’s important to note that the specific details and implications of the redemption can vary depending on the terms and conditions of the Eurobond issuance and the overall economic and financial situation of Nigeria at the time of redemption.