Plans are underway by the to issue up to $1 billion in a debut hybrid note on capital markets this year in Nigeria and other developing economies.
Director of Capital Markets and Investment Department at the World Bank Treasury, George Richardson, made the revelation, as development banks face increasing pressure to find new ways to boost their lending.
According to the National Bureau of Statistics (NBS), credit to the private sector by the deposit money banks rose by 2.5 per cent to N20.37 trillion in the fourth quarter of 2020.
The report showed that the total value of credit allocated by the banks stood at N20.37 trillion, while the oil and gas and manufacturing sectors got credit allocations of N3.93 trillion and N3.19 trillion to record the highest credit allocation during the period under review.
The Central Bank of Nigeria (CBN) claimed that the reason for the growth in banks’ loan books was the implementation of its Loan to Deposit Ratio (LDR) policy formulated to increase lending to the real sector for economic development.
Meanwhile, the G20 group of major economies has urged multilateral lenders to explore hybrid financing structures in a push to maximise balance sheets and increase funding to developing economies for them to cope with crises, including climate change.
Reuters quoted the World Bank as noting that the gesture would be only the second by a multilateral lender after the African Development Bank (AfDB) that sold its hybrid capital note in January.
Richardson said: “We are working towards a potential pilot transaction sometime this calendar year. It would be interesting to see if we can find a new way of raising money. The proof is in the pudding.”
He stated that the lender was talking to investors about the issue, and would closely monitor market conditions.
The director added that looking at the ratings that would be assigned to the new instrument, the World Bank is convinced that hybrid capital issued by multilateral development banks would be a better credit, relative to senior and unsecured bonds.
