The Federal Government of Nigeria (FGN), through its Debt Management Office (DMO), has announced its intention to raise at least N300 billion via a bond offer set for July 2024.
This target marks a significant 33 percent reduction from the previous month’s N450 billion target, reflecting a recent trend of lower demand for government bonds.
Scheduled for auction on July 15, 2024, with a settlement date of July 17, 2024, the bond offer will feature three different re-openings, each with distinct maturity dates and interest rates, catering to a variety of investor needs. The bonds will be issued 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.
The first bond offering in the July 2024 auction is a re-opening of the 19.30 percent FGN APR 2029 bond, targeting N100 billion. The second bond is the 18.50 percent FGN FEB 2031, also aiming to raise N100 billion. The third and final bond offering is the 19.89 percent FGN MAY 2033 bond, which boasts the highest interest rate among the three and also targets N100 billion. Collectively, these bonds aim to raise a total of N300 billion.
This strategic re-opening of bonds demonstrates the federal government’s approach to managing its debt portfolio while presenting attractive opportunities to investors. The primary objective of this bond offer is to generate substantial capital to support the government’s fiscal policies and infrastructure development.
The FGN aims to attract both local and international investors, thereby boosting the financial inflow into the country’s economy. The raised funds are crucial for financing key projects in sectors such as transportation, healthcare, education, and power, as well as for meeting budgetary commitments and reducing reliance on external borrowing, which often comes with stringent conditions and higher interest rates.
Despite these efforts, the federal government has faced challenges in raising its target amounts in recent months. In the May auction, the government planned to raise N450 billion but ended up raising N380.769 billion despite oversubscription. This amount was 39 percent less than the N620.088 billion raised in April. The aggregate subscription across all tenors in May was N551.316 billion, significantly lower than the N920.088 billion in April.
Similarly, in June, the federal government raised N297.006 billion, approximately 66 percent of its target. This amount was about 22 percent less than the N380.769 billion raised in May. The total subscription across all tenors in June was N305.257 billion, far lower than the N551.316 billion recorded in May. The auction result for June 2024 revealed a shift in investor preferences towards higher-yielding and longer-tenor bonds amidst a backdrop of cautious market sentiment.
Despite the broader market’s reticence, the DMO recorded a non-competitive allotment of N301.300 billion in May, indicating continued interest from certain institutional investors.
The federal government’s July 2024 bond auction represents a crucial effort to secure necessary funding for national development, amidst a challenging economic environment and evolving investor sentiment.
