Nigeria’s Fidelity Bank aims to sell up to 50 billion naira ($163.2 million) in Tier II debt before the second quarter of next year to refinance existing bonds as yields fall, the mid-tier lender said on Friday. Bond yields have been declining on the local debt market in the face of recent central bank policies aimed at forcing lenders to boost credit to businesses and consumers, which could swell naira liquidity on the money market.
We might issue naira bonds before Q2 2020 … between 30 billion naira and 50 billion naira,” the bank’s head of investor relations, Samuel Obioha, said. “Currently, we have a seven-year local bond issued in 2015 … callable after five years. We might issue a new Tier II bond before May 2020 to replace the existing bond and take advantage of its capital impact.”
Debt market yields have dropped from a high of 18% since the government redeemed some of its treasury bills in 2017, rather than rolling them over as before to lower borrowing cost. Yields on the one-year Treasury bill were quoted around 11% on Friday.
Nigeria’s central bank has been tightening liquidity to curb inflation and attract foreign investors into the bond market to support the naira. But in a surprise change of stance, the bank in March cut interest rates by 50 basis points for the first time since November 2015. Analysts forecast another 50 basis point rate cut at the central bank’s next rate meeting on Tuesday. Last week the central bank announced policies aimed at boosting credit growth in Africa’s biggest economy following a recession. The bank hopes it can help revive an economy stuck with low growth. However, pressure has started to build on the currency, traders say.
Fidelity Bank said it had met central bank’s new lending requirements and that it expected yields to moderate as competition for credit rose, which could hurt margins. $1 = 306.45 naira. Reuters
Pix: Fidelity Bank headquarters, Lagos