FGN Bonds: Resident holders account for 87.20% of bonds in 2017– DMO

The Debt Management Office (DMO) said that allotments of Federal Government bonds by residency classification showed that resident holders accounted for N1.35 million or 87.20 per cent of bonds in 2017, compared to N1.29 million or 98.62 per cent in 2016.

This is even as the nation’s debt manager disclosed that only three corporate entities accessed the domestic bonds market in 2017 with a total issuance of N23.15 billion.

DMO in its recently published 2017 Annual Report and Statement of Accounts, made available to the media on Sunday, stated that non-resident investors held N198.39 million or 12.80 per cent of the bonds in 2017, compared to N18 million or 1.38 per cent in 2016, indicating an increased participation by the non-resident category of investors at the auctions.

“This was on account of the relative stability in the Foreign Exchange Market and the improving macroeconomic indicators, which have enhanced investor confidence in the Nigerian economy.”

The DMO also said that the size of the Domestic Bond Market was N13.51 billion as at Dec. 31, 2017, compared to N12 billion as at Dec. 31, 2016, representing an increase of N1.48 billion or 12.30 per cent.

It added that the share of Federal Government of Nigeria’s securities relative to the total size of the domestic bond market increased from N11 billion in 2016 to N12.58 billion in 2017 due to the introduction of new debt instruments in the market.

It said that while corporate and States Government bonds recorded minimal issuances relative to the redemption of existing instruments, the Supra-national bond witnessed no new issuance during the period under review.

Meanwhile, the DMO latest reprt added that bonds segment of the domestic bond market witnessed a slowdown in activity in 2017, compared to 2016, which had N108.04 billion issued by nine corporates.

It said that this represented a percentage decrease of 78.57 per cent, adding that the decline in the issuance by corporates could be attributed to the high borrowing cost prevalent in the domestic capital market in 2017.

It listed the three corporates to be Dufil Prima Foods Plc, Viathan Funding Plc and LAPO Micro Finance Bank SPV Plc.

It, however, said it expected corporate bonds issuances would increase in the near term with the easing of inflationary pressure and reduction in yields of sovereign benchmark.

The report stated that in five consecutive years, the Federal Government’s bonds witnessed over subscription.

Giving an analysis of the bonds primary market activities, it said that benchmark bonds of five, 10, and 20 years were issued by the Federal Government in the primary market in 2017.

The report added that sub-national bond issuance rose from N47 billion in 2016 to N97.39 billion, in 2017, an increase of 107.21 per cent in the volume of issuance.

It, however, said that only the Lagos State Government accessed the domestic bond market in 2017.

Nigeria issues sovereign bonds monthly to support the local bond market, create a benchmark for corporate issuance and fund its budget deficit.

The DMO’s primary responsibility is to manage public debt. This it does by introducing initiatives and products to support the development of the domestic market.