STL Trustees Capital Market & Money Market News Recap

While you were away!

FGN SET TO ISSUE FIRST SOVEREIGN SUKUK THIS JUNE

The Debt Management Office (DMO) on Tuesday 14th June 2017 announced that the Federal Government of Nigeria (FGN) is set to sell a 100 billion naira ($328 million) debut sovereign Sukuk in the local market this month, to help fund road projects.
The proposed Islamic bond will have a 7-year tenor and is billed to go on sale on June 28, 2017, for three days via book building. Subsequent to the sale, the bond will be tradable on the Nigerian Stock Exchange and on FMDQ over-the-counter platform.
According to the DMO, the issue is “part of the plan to fast-track the development of infrastructure and engage in project-tied capital raising”. The Sukuk will target retail and institutional investors and FBN Merchant Bank and Islamic wealth manager Lotus Capital are to act as managers for the sale, while STL Trustees Limited and FBN Trustees Limited will act as trustees to the Sukuk Holders.
Although the proposed Issuance is the first Sukuk to be issued by the FGN, it is actually the second Sukuk issued in Nigeria, as the Osun State Government had issued the very first Islamic Bond worth 11.4 billion naira, in 2013.
The latest issuance is part of plans to develop alternative funding sources for government and to establish a benchmark curve for corporates to follow.
FGN BEGINS ROADSHOW FOR DIASPORA BONDS

The Federal Government started an international roadshow for the sale of the $300 million diaspora bond on Tuesday, June 13, 2017. The Debt Management Office (DMO), in a notice on Thursday 8th June 2017, said the government had named Bank of America Merrill Lynch and Standard Bank of South Africa as joint lead managers for the sale. The bond, targeting Nigerians living abroad, is expected to give subscribers the opportunity to invest locally and help fund the government’s infrastructure development plans.
The roadshow has meetings planned in Britain, Switzerland and the United States, and as stated by the DMO, Nigeria has filed a registration statement for the bonds with the United States Securities and Exchange Commission.
The DMO added that the bonds would be listed in London but gave no price expectations.
Nigeria, grappling with its first recession in 25 years that was largely brought on by low oil prices and the impact of attacks on energy facilities in the Niger Delta, has set a budget of N7.44tn this year.
The country expects a budget deficit of about N2.21tn in 2017 as it tries to spend its way out of a recession, with more than half the deficit to be funded through external borrowing.
The Federal Government successfully raised $1bn in February and $500m in March from Eurobond sales and is planning more external borrowing to plug the gap in this year’s budget.

CBN TO AUCTION N133 BILLION WORTH OF TREASURY BILLS NEXT WEEK
The Central Bank of Nigeria’s (CBN) has announced plans to sell 133.24 billion naira ($424 million) worth of treasury bills at an auction next week.
In a notice issued by the apex bank on Wednesday 14th June 2017, the bank said it plans to offer 28.12 billion naira worth of three-month debt, 55.12 billion naira in six-month bill and 50 billion naira in one-year note, using the Dutch auction system on June 21. Settlement will be made next day after the auction.
At the end of this week, the monetary body would issue 1.24 trillion naira worth of the Treasury notes in the third quarter, starting from June 15 to August 31.
The central bank issues treasury bills twice a month to help the government fund its budget deficit, support commercial lenders in managing liquidity and curb inflation.
FGN DIASPORA BOND GIVEN AN EXPECTED RATING OF “B+ (EXP)” BY FITCH RATINGS
Fitch Ratings has assigned Nigeria’s upcoming USD- denominated senior unsecured bonds an expected rating of ‘B+ (EXP)’. The assignment of the final rating is contingent on the receipt of final documents materially conforming to information already reviewed. The expected rating is in line with Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) of ‘B+’. The Outlook on the IDR is Negative.
The rating is sensitive to changes in Nigeria’s Long-Term Foreign-Currency IDR. On 24 January 2017, Fitch affirmed Nigeria’s Long-Term Foreign-Currency IDR at ‘B+’ and revised the Outlook to Negative. The Long-Term Local-Currency IDR was also affirmed at ‘B+’ with a Negative Outlook.
FGN SAVINGS BOND ALLOTMENT DROPS TO N607.3 MILLION
The Debt Management Office (DMO) has announced that the Federal Government allotted N607.3 million in its June 2019 and 2020 savings bond sales, lower than the N790.85 million it allotted in May.
In the DMO website, it is stated that N271.56 million was allotted at 13.18 per cent with 425 successful subscriptions to mature in June 2019.
It also said that N335.7 million was allotted at 14.18 per cent with 496 successful subscriptions to mature in June 2020.
This figure indicates a drop in allotments and subscriptions over the past months.
The savings bond was introduced in March, targeted at the lower income earners to encourage savings and also earn more income (interest) compared to their savings accounts with banks.
In its first sale which was carried out in March, the Federal Government allotted N2.1 billion to 2,575 subscribers.
In April sales, it allotted N1.2 billion to 1,798 subscribers and in May it dropped to N790.85 million for 1,233 subscribers.
The savings bond issuance is expected to help finance the nation’s budget deficit.
The bonds are debt securities (liabilities) of the Federal Government backed by its ‘full faith and credit’.
Interests are to be paid at regular periods and principal repaid at maturity.
They have a tenure of between two to three years and a minimum size of investment of N5,000 and maximum of N50 million.
It is aimed at deepening national savings culture, diversifying funding sources for the government and providing opportunity to all citizens, irrespective of income level to contribute to national development.
DOLLAR EXCHANGE RATE REPORT 1st JUNE TO 16th JUNE, 2017

This report is a compilation of the dollar exchange rate at the official and parallel market from the 1st of June to the 16th of June, 2017. The quoted parallel market prices are to serve as a guide to readers, as they represent the average price obtained daily from different black market dealers in the Country.