DMO Raises N669.94bn from January 27th 2025 Bond Auction

Debt Management Office (DMO) of Nigeria successfully raised a total of N669.94 billion from its bond auction held on January 27, 2025. This auction result announced today, signals an overwhelming response from investors, leading to an allotment of N606.46 billion.

Auction Result Overview

The auction is part of the DMO’s strategy to manage Nigeria’s debt through the issuance of FGN bonds. According to the announcement made via X (formerly Twitter) the auction was set to offer N450 billion worth of bonds, inviting participation through Primary Dealer Market Makers (PDMMs) like Access Bank, First Bank, and Stanbic IBTC, among others. This was aimed at both domestic and international investors looking to invest in Nigerian securities.

Auction Details

The DMO, acting on behalf of the Federal Government of Nigeria, conducted the bond auction under the Debt Management Office (Establishment) Act 2003 and the Local Loans (Registered Stock and Securities) Act, CAP. L17, LFN 2004. The auction was open for subscription, offering three bond series:

• N100,000,000,000.00 – 19.30% FGN APR 2029 (5-Year Re-opening)
• N150,000,000,000.00 – 18.50% FGN FEB 2031 (7-Year Re-opening)
• N200,000,000,000.00 – FGN JAN 2035 (10-Year New Issuance)

The auction took place on January 27, 2025, with the settlement date set for January 29, 2025. The bonds were issued at N1,000 per unit, subject to a minimum subscription of N50,001,000 and in multiples of N1,000 thereafter. For reopened bonds, successful bidders paid a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, along with any accrued interest.

Auction Results

The results of the auction, detailed in another post by DMO Nigeria on January 28, 2025, revealed that the total amount raised exceeded the initial offer of N450 billion, amounting to N669.94 billion, showcasing strong investor confidence in Nigerian bonds. Here are the specifics of the bonds offered and their respective allotments:

19.30% FGN APR 2029: This bond was allotted N78.86 billion at an interest rate of 21.79%. The high interest rate reflects the investor’s demand for higher returns in light of the economic climate.

18.50% FGN FEB 2031: With an allotment of N159.29 billion, this bond was issued at 22.5%. This bond’s longer maturity period attracted investors looking for longer-term investment opportunities, which also reflects investor’s demand for higher interest rates.

22.60% FGN JAN 2035: The largest portion of the auction, this bond was allotted N368.31 billion at the same rate as its coupon, 22.6%. This bond’s high yield and long-term nature made it particularly attractive, indicating a preference for longer-term securities with higher yields.

What you should know

These bonds are issued by the Federal Government of Nigeria and qualify as securities for investment under the Trustee Investment Act.

They are tax-exempt for pension funds and qualify as liquid assets for banks.

The interest payments are made semi-annually, with bullet repayment upon maturity.

The bonds are listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange, ensuring secondary market trading.

Investor’s Behavior

The auction results indicate a nuanced investor behavior. The high allotment for the 2035 bond suggests that investors are seeking long-term investment options with higher yields, possibly due to expectations of inflation or economic uncertainty over the longer term. The interest rates at which these bonds were sold also highlight the market’s demand for higher returns, which could be influenced by various macroeconomic factors including inflation forecasts, fiscal policy expectations, and global economic trends.

Implications for Nigeria’s Economy

By raising such a significant amount, the DMO has effectively managed to meet part of the government’s financing needs without resorting to more expensive borrowing options. This helps in maintaining fiscal discipline. The oversubscription of the auction points to a robust confidence in Nigeria’s economic stability and the government’s commitment to servicing its debt, which could bolster the country’s credit rating.

Injecting N669.94 billion into the economy through bond issuance can enhance liquidity, providing funds for both government projects and private sector investments. The high yields offered might influence other interest rates in the economy, potentially affecting borrowing costs for businesses and individuals.

Yesterday’s bond auction by the DMO not only surpassed expectations by raising N669.94 billion but also provided insights into investor sentiment toward Nigerian securities. With a clear preference for longer-term bonds offering higher yields, the auction results reflect both the strategic investment choices of participants and the broader economic conditions at play.

As Nigeria continues to navigate its fiscal policies, such auctions will remain critical in managing national debt while fostering economic growth. For those interested in participating in future auctions, contacting any of the listed PDMMs would be the first step towards engagement with Nigeria’s bond market.

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