Scarce liquidity triggers waning appetite for FGN bonds …Experts

Sustained effort by the Central Bank of Nigeria (CBN) to manage system liquidity, may have frustrated effort of many prospective investors to take part in Federal Government’s retail bonds and other fixed income instruments.
Cross- section of experts, who spoke to Daily Times, said that system liquidity tightening by the apex bank, may have condensed the participation of a cross-section of Nigerians in the Green bond, as some have said that the instrument lacks supportive liquidity in the secondary market.
The development, experts further said, may have impact on the expected Sukuk, Islamic bond expected to be issued soon by the Debt Management Office (DMO).
Daily Times Nigeria recalls that last Wednesday, the DMO may view its Wednesday’s monthly as a success , just as it raised N99 billion (US320m), instead of its offer value of N140 billion. The DMO to achieve the said value, set marginal rates for all three bonds, lower than the rates of May offer.

DMO, a research firm noted, was operating from a position of strength due to its successful front-loading of issuance, having so far, as at the end of June, 2017,raised N850bn (gross) in the half-year and projected to raise N1.25 trillion for the domestic financing of the 2017 budget, expected to be supported by the FGN savings bonds.

The DMO may justifiably feel that it has “done its bit” towards budget deficit financing with these auctions, as well as, the sales of the sovereign Eurobonds and the diaspora issue. It would feel more comfortable with tangible evidence that the multilateral contribution from the World Bank and the African Development Bank is forthcoming. We note that these partners were to have helped finance the 2016 deficit.
It would also be recalled that N13bn demand for the five-year benchmark, was also poor, even though the paper is trading higher in the secondary market.
Analysts noted that sustainability of the DMO to sustain fund mobilization to support 2017 budget , is made more flexible with issuance in the months ahead since it has notified the public of the coming launch of Nigeria’s first sovereign sukuk (Islamic bond) in naira to raise N100bn.