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UPDATE 2-Demand heavy for World Bank arm's first naira bond
February 5, 2013 / 4:45 PM / in 5 years

UPDATE 2-Demand heavy for World Bank arm's first naira bond

* IFC raises size of “Naija bond” by 50 pct

* Domestic investors looking for diversification

* Bond to support local capital markets

By Tosin Sulaiman and Chijioke Ohuocha

JOHANNESBURG/LAGOS Feb 5 (Reuters) - The World Bank’s private sector arm, IFC, issued 12 billion naira ($75 million) worth of its debut Nigerian local currency bond on Tuesday with a yield of 10.2 percent.

Jingdong Hua, vice president and treasurer of the International Finance Corporation, confirmed a Reuters report and said the issue was 50 percent larger than the original 8 billion naira planned.

“The investor demand was tremendous,” he told Reuters in a phone interview from Washington D.C. “We got very positive messages from market participants that they welcome the new asset class coming into the market.”

The 5-year issue, dubbed the “Naija” bond after a popular local nickname for Nigeria, is the first placement by a non-resident issuer in the domestic bond market.

The IFC wants the bond to support Nigeria’s capital markets and increase access to long-term local currency finance.

Its committed portfolio in Nigeria stands at $1.1 billion, the largest country portfolio in Africa and the eighth-largest globally, it said in a statement.

The investors in the bond are Nigerian pension funds, asset managers and commercial banks.

“The diversification desire is strong because so far the investment universe is very limited in the fixed income space, especially when you’re looking at high credit quality,” Hua said, explaining the strong demand for triple-A rated IFC’s bond.

“There is rarity value because this is a first and the supply is quite limited in terms of the size.”

Solomon Adegbie-Quaynor, IFC’s Country Manager for Nigeria, said: ”The IFC Naija bond supports the efforts of the government and authorities to deepen domestic capital markets and grow the corporate bond market in Nigeria.

“A well-developed corporate bond market in turn can provide affordable, long-term naira funding to meet the financing needs for critical sectors such as power.”

Nigeria introduced bond trading on its stock exchange platform last Friday to encourage retail investor participation, which the bourse hopes will increase secondary market trading and liquidity.

Bankers expect the IFC bond to be listed on the local bourse in a week or two.

IFC plans to launch local currency bonds in nine other African markets this year, including South Africa, Ghana, Zambia and Kenya, and has received approvals from regulators in some of those markets, Hua added.

“I‘m very optimistic that within the year we should be able to work on at least one or two other markets,” he said.

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