FG to raise N140bn through bonds auction next week – DMO

The federal government through the Debt Management Office (DMO) has announced that it would raise a total of N140 billion through bonds auctions on May 10, next week Wednesday.
The debt office will sell 40 billion naira of bonds due in 2021 and 50 billion naira each of bonds due in 2027 and in 2037, using a Dutch auction system.

At its last auction, it sold fewer bonds than it had planned after investors demanded higher yields to compensate for inflation.

Precisely, at its April 12 debt auction, the federal government targeted N135 billion ($429.25 million) in naira-denominated bonds auction.

However, Nigeria auctions sovereign bonds on a monthly basis to help fund its budget deficit, support the local debt market and maintain a benchmark for companies to follow.
The anticipated one would make the fourth in the year as the biggest economy in Africa expects a N2.36 trillion budget deficit for 2017, with half of it funded through domestic borrowing.

Meanwhile, the last two auctions, the debt office sold more bonds than expected due to an increased demand for the local debt by investors.

Just recently, DMO introduced savings bonds for retail investors which is offered in Two- and three-year maturities, with interest paid quarterly.

According to DMO, “The bonds will be good for savings towards retirement, marriage, school fees and house projects.”

The nation’s debt office explained that savings accounts at Nigeria’s commercial banks pay up to 5 percent in interest, but the country’s inflation is running at more than 18 percent annually.

The bond offer will open on March 13 and end after five days, the debt office said. New issues will be sold every month. The minimum subscription will be 5,000 naira ($16) and the maximum 50 million naira. Nigeria’s government depends on local borrowing to fund more than half its budget deficit, which is expected to reach 2.36 trillion naira this year.

It issued a $1 billion Eurobond last month and is now seeking approval from parliament for an additional $500 million Eurobond. Last week, it said it would offer a 20 billion-naira “green bond” in April.

The government also plans to sell a $300 million diaspora bond abroad this year and its first sovereign sukuk in the local market.

Meanwhile, the 8 fold over- subscription of the recent Eurobond orders in excess of US$7.8 billion compared to a pre- insurance target of US$1bn is a strong indication that international investment community are confident in Nigeria economic reform agenda, the federal government has said.

The largest economy in Africa, eexpects a 2.36 trillion naira budget deficit this year, half of which it hopes to fund through local borrowing.

Nigeria, which has Africa’s biggest economy, issues sovereign bonds monthly to help fund its budget deficit, support the local debt market and maintain a benchmark for companies to follow.