The Federal Government of Nigeria, through its Debt Management Office (DMO), has announced plans to raise at least N300 billion through its bond offer scheduled for July 2024.
This amount is 33% lower compared to the previous month’s N450 billion target, as the DMO adjusts to a recent trend of lower demands for government bonds.
The bond offer will be conducted by auction, featuring three different re-openings, each with distinct maturity dates and interest rates, providing a variety of options for potential investors.
Breakdown of the bond offer
- The first bond offering in the Federal Government of Nigeria’s July 2024 bond auction is a re-opening of the 19.30% FGN APR 2029 bond, with a targeted raise of N100 billion.
- The second bond in the July 2024 auction is the 18.50% FGN FEB 2031, also targeting N100 billion.
- The third bond offering in this auction is the 19.89% FGN MAY 2033 bond, with the highest interest rate among the three at 19.89%. This bond also aims to raise N100 billion, bringing the total amount offered to N300 billion.
Each of these bonds provides unique features in terms of maturity and interest rates, catering to a broad range of investor needs and preferences.
The Federal Government’s decision to re-open these bonds suggests a strategic approach to managing its debt portfolio while offering attractive opportunities to investors.
The auction date is set for July 15, 2024, with a settlement date of July 17, 2024. The bonds are being offered in units of N1,000 each, with a minimum subscription requirement of N50,001,000 and increments in multiples of N1,000 thereafter. Interest on these bonds will be payable semi-annually.
What you should know
The primary objective of this bond offer is to raise substantial capital to support the government’s fiscal policies and infrastructure development.
By issuing these bonds, the FGN aims to attract both local and international investors, thereby increasing the financial inflow into the country’s economy.
These funds are crucial for financing key projects in sectors such as transportation, healthcare, education, and power.
Moreover, the raised capital will help the government meet its budgetary commitments and reduce the reliance on external borrowing, which often comes with stringent conditions and higher interest rates.
However, the federal government has been raising and allotting lower than its target in the past two months.
Although the government planned to raise N450 billion in the May auction, it ended up raising N380.769 billion despite the oversubscription of the bonds.
The amount raised was 39% less than what was raised in the April FGN bond auction. The aggregate subscription across all tenors was N551.316 billion, far lower than the N920.088 billion in subscriptions recorded in April 2024.
However, the DMO also recorded a non-competitive allotment of N301.300 billion, suggesting continued interest from certain institutional investors, despite the broader market’s reticence.
For June, the federal government raised N297.006 billion, which is only about 66% of its target. The amount raised in June was approximately 22% less than the N380.769 billion raised in May.
The total subscription across all tenors reached N305.257 billion, far lower than the N551.316 billion in subscriptions recorded in the previous month.
The auction result released by the DMO for the June 2024 bond auction revealed a shift in investor preferences towards higher-yielding and longer-tenor bonds, amidst a backdrop of cautious market sentiment.
