Nigeria: Union Bank works with Citi on Eurobond sale

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Nigeria’s Union Bank is working with Citigroup and Renaissance Capital on a planned Eurobond sale, two banking sources told Reuters, following on from its $163 million share sale in the fourth quarter to boost lending.

The bank’s plans also follow Nigeria’s $2.5 billion Eurobond sale in February to refinance local currency bonds at lower cost. The West African country aims to raise a further $2.8 billion this year.

Union Bank and Renaissance Capital declined to comment, while a Citi representative was unable to make immediate comment.

Banking sources said Union could issue up to $250 million in bonds including one in local currency.

The bank, in which Atlas Mara owns a 22.1 percent stake, plans to tap opportunities to lend to agribusinesses.

Nigerian banks are gearing up to tap Eurobonds to boost lending and to refinance existing dollar debts before interest rates begin to rise further in the United States.

The race for more capital has also been fuelled by stricter accounting principles on how lenders recognise losses, which are likely to knock 50-200 basis points off industry capital, banking executives have said.

The central bank this year put a restriction on dividend payments for lenders with high non-performing loans and capital ratios lower than its minimum requirement.

Banking sources said that rival lenders could follow Union Bank’s lead. FCMB is considering a Eurobond and Diamond Bank, with an existing $200 million Eurobond due next year, could tap markets again, sources say.

Fidelity Bank issued a $400 million Eurobond in October at 10.75 percent to refinance existing debt and boost lending. The mid-tier bank told Reuters it used the bond proceeds to fund its trade book in the fourth quarter.

An FCMB spokesman said the bank was open to raising funds in the future but details have not been worked out. A Diamond Bank official said investors would be informed on any decision to raise fresh capital.