People & Money

FGN Bonds Sold Out In February 2023, as DMO Raises N724.9 Billion

The Debt Management Office has announced the results of its February FGN bond auction. In the auction, the DMO re-opened four bonds which were the 13.98% FGN FEB 2028 (10-Year Bond), 12.50% FGN APR 2032 (10-Year Bond), 16.2499% FGN APR 2037 (20-Year Bond), and 14.80% FGN APR 2049 (30-Year Bond).

Also Read: Reforms and Infrastructure in Nigeria: A Focus on Citizens’ Well-being Would Recalibrate Investment Priorities – Eyo Ekpo

When a bond that has been issued before is made available for purchase once again, it is referred to as a reopened bond. Initially, a bond is classified as a new issue or an original issue when it is first issued.

The auction which took place on February 13, 2023, resulted in a total of 577 bids being received, valued at N724.9 billion. The total amount offered for auction was N360 billion. The total allocation amounted to N771.56 billion, with successful bids receiving allocations at the marginal rates of 13.99%, 14.90%, 15.90%, and 16.00%.

The coupon rates for each bond will remain unchanged. However, the 13.98% FGN FEB 2028 (10-Year Bond), 12.50% FGN APR 2032 (10-Year Bond), 16.2499% FGN APR 2037 (20-Year Bond), and 14.80% FGN APR 2049 (30-Year Bond) will be allocated at the marginal rates of 13.99%, 14.90%, 15.90%, and 16.00%, respectively, for successful bids.

Also Read: FGN to Borrow up to N400 Billion Per Month in 2023 to Fund Budget Deficit

The auction’s settlement date is set for the 15th of February, and the bonds will reach maturity on February 23, 2028, April 27, 2032, April 18, 2037, and April 26, 2049, respectively.

Recall that the Federal Government aimed to raise at least N360 billion through FGN bonds to finance the 2023 budget. In January, the bonds were oversubscribed as a total of 518 bids were received valued at N805.1 billion. The trend of oversubscription has persisted into February as the total allotted amount reflects strong demand for FGN bonds by investors. This outcome reflects the investors’ trust in the Nigerian economy and the government’s capability to meet its debt commitments.

The DMO explained in a statement that the auction was conducted as a means of generating funds for the implementation of the Federal Government’s 2023 budget and financing significant infrastructure projects across Nigeria. The active promotion of FGN bond issuance by the DMO aims to diversify the funding sources of the country and decrease its reliance on short-term borrowing.

Nigeria’s bond market has been on a growth trend despite the country’s burgeoning debt profile. Though the debt to GDP ratio is still within the recommended threshold of 40%, it is likely to hit N77 trillion ($168 billion) if the N22.7 trillion ways and means borrowings from the CBN are securitized. For the 2023 budget, the FG is seeking to secure an additional N1 trillion from the CBN through ways and means.

Also Read: Finding a Way Out of Nigeria’s High Debt Costs

Nigeria’s growing debt profile with a corresponding revenue and expenditure problem has put a negative spotlight on the country’s credit ratings. In 2023, Moody’s downgraded Nigeria’s credit rating to a Caa1 with a stable outlook, S&P maintained Nigeria’s ratings at ‘B-/B’ with a negative outlook, and Fitch downgraded Nigeria from a B to a B- with a stable outlook.

Although the government has emphasized the necessity of borrowing for crucial infrastructure and economic stimulation, numerous experts have expressed concerns that escalating debt levels could ultimately become unmanageable.

David Olujinmi

David Olujinmi studies Engineering but his true passion is research and analysis. He writes about finance, particularly the capital market, investment banking, and asset management. More »

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