DMO Fails to Raise N2.5Trn from FGN Bond Auction
The Debt Management Office (DMO) said on Tuesday that it raised N1.495 trillion from Federal Government of Nigeria (FGN) bonds at its monthly auction of Feb. 2024. The authority sought to raise a total sum of N2.5 trillion but failed due to tight market subscriptions.
DMO offered N1.25 trillion seven-year bond, maturing in 2031 and another N1.25 trillion 10-year FGN bond, maturing in 2034. The debt office said that it received total bids of N1.9 trillion, making it the highest it received in any of the FGN securities auctions.
At the close of the auction, a total of N873.53 billion was allotted for the 2031 FGN bond and N621.38 billion was allotted for the 2034 FGN bond, making a total allotment of N1.495 trillion.
“The relatively large amount on offer was based on the FGN’s financing need, the opportunity to attract foreign investors, as well as, the premise that some local investors may be able to access pools of funds,” it said.
The FGN bonds and other government securities like the savings bond and the Sukuk bond constitute the local component of government borrowing. The N1.495 trillion bonds allotment is part of the new domestic borrowing of six trillion naira in the 2024 Appropriation Act.
After the N1.0 trillion NTB sales earlier in February, the DMO, in its monthly bond auction, pulled a similar string, offering the amount a slew of investment banking analysts consider to be unprecedented (N2.5 trillion) at yesterday’s bond auction.
The auction was undersubscribed largely due to weak appetite for naira assets, with both the bid-to-offer and bid-to-cover settling at 0.76x and 1.27x, respectively. According to analysts’ reports, the average stop rate printed at 18.75% as against 15.75% in January 2024.
“To our minds, we perceive that these recent aggressive issuances by the government might have been necessitated by the desire to cut back on the arbitrary CBN Ways and Means financing, incentivise foreign investment and mop up expected liquidity”, CardinalStone Partners said in a commentary.
The multi-asset investment banking firm said the aggressive stance may have also been aided at containing inflation and shifting some of the interest expense burden of liquidity mop-ups to the fiscal authority.
Meanwhile, the National Assembly also, recently, approved the securitisation of N7 trillion “Ways and Means’’ advances to the Federal Government. #DMO Fails to Raise N2.5Trn from FGN Bond Auction Reps to Investigate Privatisation, Concession of FG Silos
