N7.043trn budget deficit: FG gets N1trn for budget financing

*As DMO raised N2.13trn from FGN bond in two months

Raises N45.135bn from FGN Savings Bond in 5years

By Motolani Oseni

The Debt Management Office(DMO) has said, it has deployed N1 trillion to the federal government out of the N2.129 trillion which it has so far raised this year through government bonds for budget financing.

According to the DMO, the N1 trillion, which is already 14.2 per cent of the total borrowing requirement of N7.043 trillion for the year, was used to finance the federal government debt obligations.

The DMO has so far raised N2.13 trillion through the FGN bonds as well as the savings at the January and February bond auctions this year.

The DMO, in a statement issued on Tuesday said, its attention was “drawn to a report which stated that the Federal Government of Nigeria has raised the sum of N2.129 trillion between January and February 2023 through the issuance of Domestic FGN Securities.

“The Report further indicated that at this rate of borrowing, the Government may exceed its domestic deficit funding requirement of N7.043 trillion in 2023. The DMO wishes to clarify that the Domestic Issuance Programme is designed not only to provide funds to finance the Budget Deficit but to also refinance the FGN’s maturing obligations during the fiscal year.

“Thus, while a total of N2.129 trillion has been raised in January and February from issuances of FGN Bonds, Nigerian Treasury Bills and FGN Savings Bond, only N1 trillion has been deployed for deficit financing, representing 14.2 per cent of the total requirement of N7.043 trillion for the year. It should be noted that the balance of the funds raised is for refinancing maturing obligations.

“While the DMO is maximizing the opportunity provided by the strong investor demand to raise funds to facilitate early implementation of the 2023 Budget, the DMO is always guided by the law and thus, cannot exceed the legally approved New Borrowing in the Appropriation Act.”

The nation’s debt office, also, explained that the Federal Government of Nigeria has raised not less than N45.135 billion from FGN Savings Bond from a total subscription between its inception in 2017 and 2022.

The Director-General of the DMO, Patience Oniha said this on Tuesday in Lagos, at the unveiling and demonstration of the Securities subscription portal at a stakeholders meeting.

Oniha said that the FGN savings bond, which was specifically designed to encourage retail investors had done well across the six geo-political zones of the country, going by the numbers.

According to her, FGN Savings Bond is a product that the DMO introduced in March 2017 to enable retail investors to participate in the FGN securities market and promote financial inclusion.

She said that the stakeholders’ meeting was arranged to review the performance of the FGN Savings Bond and to present the portal. She said that the DMO worked with the Central Securities Clearing System (CSCS) to develop the portal.

“This explains why the Primary Dealers Market Makers, Central Bank of Nigeria, Securities and Exchange Commission, Nigeria Exchange Limited and stockbroking firms have been invited.

“The DMO believes that the product has more potential than what has been achieved so far, and has, for now, identified two ways to achieve much higher volumes and numbers of investors,” she said.

According to the director-general, in 2022 the DMO embarked on investor sensitisation programmes across a number of cities in Nigeria.

“This strategy proved successful as total subscriptions almost doubled from N8.396 billion in 2021 to N16.589 billion in 2022.

“Given this outcome, the DMO plans more of such sensitisation, as well as wider publicity.

“The other strategy is to deploy technology to the process to make the subscription fast, easy and overall, more convenient,’” she said.

She said that the portal had been tested with distribution agents for the FGN Savings Bond, adding that the presentation was to expose it to a wider group of stakeholders.

In a paper presentation, Bose Olafisoye from the DMO said that the FGN Savings Bond was introduced as part of the market development initiatives of the office.

According to Olafisoye, there is a higher and increasing investor appetite for the three-year FGN Savings Bond relative to the two-year bond, based on the level of subscription.

“This could be due to the 100 basis points difference in the coupons and investors’ preference for longer maturities,” she said.

She said that there was the need to build on gains recorded over the years in the efforts to develop the retail segment of the bond market.