Nigeria Raised N269bn from Debt Market at Higher Rates

Nigeria Raised N269bn from Debt Market at Higher Rates

It was a successful outing for the Debt Management Office after beating the target on Federal Government of Nigeria (FGN) bonds reopenings as the subscription levels improved significantly but at price as spot rates inched upward.

Last week at the primary market auction, the Nigerian debt office offered N225 billion but raised N269.1 billion, through re-openings of the 14.55% FGN APR 2029, 12.50% FGN APR 2032 and 16.24% 2037 FGN bonds.

Demand level improved on a month-on-month basis, as the DMO secured a total bid of N344.0 billion compared with a total bid of N119.2 billion at last month’s auction, according to Coronation Research. 

Analysts said the bids for the APR 2029, APR 2032, and 15-year tenor benchmarks were allotted at the marginal rates of 14.75% (previously: 14.5%), 15.2% (previously; 15.0%), and 16.2% (previously; 16.0%) respectively. The auction result shows that bid-to-cover stood at 1.27x, compared with 1.10x in October.

The demand at this auction primarily reflects improved system liquidity and end-year rebalancing/portfolio build-up by fund managers, according to analysts’ notes.  Healthier system liquidity was attributed to inflows of N105 billion and N193 billion on the back of recent maturities from OMO and NTB instruments.

The upticks recorded in FGN bond yields since the last auction in October combined with the three consecutive month-on-month declines recorded in headline inflation have encouraged fund managers to proceed with end-year rebalancing activities or portfolio build-up, Coronation Research said.

Headline inflation surged moderated to 1.24% compared with 1.82% in July 2022, according to data from the National Bureau of Statistics. The DMO’s bond issuance calendar shows a plan to raise a maximum of N2.47 trillion through FGN bonds to meet a domestic borrowing target of N3.53 trillion.

However, year-to-date, it has raised N2.75 trillion, exceeding the target by about N284.4 billion, according to a Coronation Research note. Based on the proposed 2023 FGN budget, the projected deficit is estimated at N10.8 trillion, representing 4.8% of the estimated 2023 nominal gross domestic product (GDP).

Coronation Research said this is above the 3% threshold set by the Fiscal Responsibility Act 2007, noting that the deficit would be financed mainly by new borrowings totalling N8.8 trillion. READ: FGN Bond Yield Falls ahead of DMO Auction

The balance is expected to come from privatization proceeds and drawdowns on bilateral/multilateral loans secured for specific development projects/programmes, analysts stated. #At Higher Rates, Nigeria Raised N269bn from Debt Market