* Issue oversubscribed, priced at 7.0 pct yield
* Debt ratios low, growth robust
* Fall in foreign reserves worries some investors
(Adds comment from finance minister)
By Nick Tattersall and Chijioke Ohuocha
LAGOS, Jan 21 Nigeria issued a $500 million
debut Eurobond on Friday with a 7.0 percent yield in a deal that
was heavily oversubscribed, as appetite for high-yielding assets
outweighed concern about its depleted oil savings.
Investors from 18 countries spanning Europe, the United
States, Asia and Africa took up the offer, which was 2.5 times
oversubscribed, Finance Minister Olusegun Aganga said.
"This transaction clearly puts Nigeria on the global map. We
now have a transparent and internationally observable benchmark
against which international investors can accurately price
risk," Aganga said, forecasting a rise in foreign investment
into sub-Saharan Africa's second-biggest economy.
The successful issue by Africa's top oil exporter, months
ahead of elections, could reassure others on the continent of
the strength of demand for African debt, convincing them to
press ahead with similar but delayed plans. [ID:nLDE70H0L3]
The 10-year bond was priced in line with Nigeria's 7.0
percent guidance and will pay a 6.75 percent coupon, with
settlement on Jan. 28, Thomson Reuters news service IFR said.
The pricing means investors demanded a premium to West
African peer Ghana, whose 8.5 percent Eurobond due 2017
GH032376037=RRPS is currently yielding around 6.2 percent.
While demand for high-yielding assets, the paucity of West
African credit and the relatively low volume of the issue had
been expected to fuel appetite, some potential investors were
put off by the rapid depletion in Nigeria's oil savings.
Fitch assigned the issue a 'BB-' rating on Friday, saying
low debt ratios and robust growth played in Nigeria's favour,
but also noting concern about a decline in reserves last year
despite a rise in oil prices and production.
"Reserves have risen around $1 billion since the end of
2010, but in the absence of fundamental institutional reforms on
the usage of oil revenues and savings, this gradual build-up is
unlikely to be sustained," Fitch said.
Standard & Poors has assigned a 'B+' long-term senior
unsecured debt rating to the issue. [ID:nWLA3049]
One leading fund manager who participated in Eurobond issues
by Ghana and fellow African oil producer Gabon at the end of
2006 said he was steering clear of Nigeria's offering given
concerns over the huge outflows from oil savings.
Nigeria's excess crude account (ECA), into which it saves
oil revenues above a benchmark price, has dwindled to less than
$1 billion from $20 billion at the start of the current
presidential term four years ago.
Foreign reserves, of which the ECA is a part, inched up
month-by-month to $33.5 billion by mid-January but are still
down more than a quarter on year-ago levels.
Nigeria has shrugged off the concerns, saying the spending
was needed to defend the naira currency against increased dollar
demand, fund projects in the power sector, and provide seed
funding for a planned sovereign wealth fund, which should form a
firmer legal basis than the ECA for safeguarding oil savings.
Central Bank Governor Lamido Sanusi told Reuters late on
Wednesday he believed the fall in reserves would end as the
country's banking sector gets back on its feet after a 2009
bailout and as oil production and prices rise.
"We had to draw on forex (reserves) to meet elevated
(dollar) demand levels as we couldn't risk an accelerated exit
from quantitative easing while banking reforms were still at
initial stages," Sanusi said.
"Now with monetary tightening, higher yields, a recovering
equity market ... and progress on banking resolution, a higher
oil price and stable output, my sense is that the reserve
attrition will stop," he said.
The point of the Eurobond issue is to set a benchmark yield
curve for Nigeria in the global market, rather than to raise
funds, meaning the country has ample room to repay investors.
Standard Bank analyst Samir Gadio pointed out Nigeria's
foreign reserves were 67 times the Eurobond size and that its
external debt-to-GDP ratio was just 2.3 percent.
"Overall, the risk of default on the Eurobond is marginal,"
he said in a research note.
(For more Reuters Africa coverage and to have your say on the
top issues, visit: af.reuters.com/ )
(Additional reporting by Sujata Rao-Coverley in London, John
Weavers of IFR; Writing by Nick Tattersall; Editing by )