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Nigeria Raised N1.8trn from Bonds in 6-Month

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Nigeria Raised N1.8trn from Bonds in 6-Month
Patience Oniha, DMO Chief

Nigeria Raised N1.8trn from Bonds in 6-Month

As part of an effort to finance the government spending plan, the Federal Government of Nigeria raised N1.8 trillion from the debt capital market via bonds issuance in the first sixth months of the fiscal year 2022, according to data from the Debt Management Office (DMO).

The sum raised in the local debt capital market during the period was part of a move to close Nigeria’s fiscal deficit gap in the 2022 budget amidst fiscal slippage. READ: Nigeria’s Private Sector Growth Slowdown to 6-Month Low

Nigeria budgeted more than the country earns, but total income has persistently undercut the total annual spending plan, both capital and recurring expenditures of about N11 trillion.

Recall, that the DMO held its monthly auction of FGN bonds on Monday last week where the debt office offered N225 billion but raised N226.1 billion through re-openings.

Auction detail shows that DMO reopened 2025, 2032 and 2042 FGN bonds on the market participants at the primary market auction that was greeted with heavy subscriptions. With a higher subscription level driven by a relatively healthy liquidity position, DMO secured a total bid of N552.4 billion

According to various analysts’ notes, the successful bids for the 3-year tenored, 10-year tenored and 20-year tenored benchmarks were allotted at the marginal rates of 10.1% (previously; 10.0%), 12.5% (unchanged) and 13.2% (previously; 13.0%) respectively from the auction conducted in May.

According to a research note from Coronation Merchant Bank, DMO has a domestic funding target of N3.53 trillion and an external funding target of N2.56 trillion to finance the projected deficit of N7.35 trillion in the 2022 budget.

It said that based on the DMO’s bond issuance calendars, the debt management office set out to raise a total volume of between N1.1 trillion – N1.2 trillion in the first half of 2022. However, Coronation Research said in a market report that the DMO has raised N1.8 trillion at its bond auctions which include non-competitive sales to public agencies.

“Allowing for the smaller amounts the FGN raises from the sale of other debt instruments such as NTBs and savings bonds, it is on track pro-rata to meet the domestic borrowing target for the year”, according to Coronation Research.

It said on external borrowing, the DMO raised USD1.25 billion from Eurobonds in March 2022. But a fresh Eurobond call is unlikely, according to Finance Minister due to tightening in the Eurobond market amidst rate hikes by global Central Bankers. 

Analysts noted that the average yield in the Eurobond market for sovereigns under Coronation Merchant Bank has increased to 12.9% at the end of the first half of 2022 from 7.2% in December 2021.

“We expect increased borrowings in the domestic debt market”, Coronation said, noting that the DMO’s bond issuance calendar for the third quarter of 2022 is yet to be published.

Data from the debt office indicates that FGN bonds represented 70.7% of total FGN domestic debt in March 2022, compared with 72% at the end of December 2021. Nigeria’s domestic fixed income market has been dominated by local investors since the pandemic’s peak in 2020, according to separate reports reviewed by MarketForces Africa.

The participation of foreign portfolio investors in recent auctions has been minimal amidst foreign currencies scarcity in the local economy, though demand for imports keeps surging. 

The latest monthly report by National Pension Commission (PENCOM) shows that in May, FGN bonds held by pension fund administrators had increased by 3% month on month and 10.4% year on year to N8.5 trillion.

PENCOM report shows that FGN bonds accounted for 59.7% of total assets under management, compared with 61.5% recorded in the corresponding period of 2021. # Nigeria Raised N1.8trn from Bonds in 6-Month

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