The African Development Bank’s application to establish a 160 billion Nigerian naira ("NGN") Medium Term Note Programme ("Programme") in the Nigerian capital market was approved by the Securities & Exchange Commission ("SEC") of Nigeria on Friday, 6 June 2014.
The SEC’s approval also included a "No-Objection" for the African Development Bank ("AfDB" or the "Bank") to commence the book-building process for a planned issuance of a first tranche of NGN 16.2 billion under the Programme.
The Bank will 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 Bank’s proposed offering. The proceeds of the first bond issuance will be used to finance a line of credit to a financial institution which will 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. The Bank’s NGN 160billion Programme will 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.
The SEC welcomed the Bank’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. Notably, AfDB is the first Supranational to establish a local currency Programme in the Nigerian capital markets - testament to the Bank’s commitment to developing the Nigerian capital markets and funding projects in NGN in the Country.
AfDB is being advised on this 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.
