The Federal Government of Nigeria, through the Debt Management Office (DMO), has announced a bond issuance worth N120 billion for November 2024. This marks a 33.3% decrease from the N180 billion raised in October, signaling a possible shift in the government’s borrowing strategy, which could be attributed to either reduced funding needs or improved revenue inflows.
Breakdown of the November Bond Auction
The bond auction will consist of two re-openings of existing bonds: the 19.30% FGN APR 2029 (5-year) and the 18.50% FGN FEB 2031 (7-year), with each bond valued at N60 billion. Both bonds are expected to generate strong investor interest due to their attractive coupon rates, reflecting current yield conditions.
Scheduled for November 18, 2024, with settlement on November 20, 2024, the bonds will be offered at N1,000 per unit, with a minimum subscription of N50,001,000 in multiples of N1,000. These bonds are eligible for investments under the Trustee Investment Act and benefit from tax exemptions under the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA), making them particularly appealing to pension funds and institutional investors. Additionally, the bonds will be listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange, ensuring liquidity and tradability.
Previous Bond Issuances and Investor Interest
In October 2024, the Federal Government raised N289.597 billion through a bond auction. This auction also featured two re-opened bonds: the 19.30% FGN APR 2029 (5-year) and the 18.50% FGN FEB 2031 (7-year). Despite inflationary pressures, the auction saw significant investor interest, highlighting strong demand for government securities.
The October auction had initially offered N180 billion, with N90 billion allocated to each bond. However, investor demand led to a total allotment of N289.597 billion, surpassing expectations. The 5-year bond attracted N60.737 billion, while the 7-year bond saw a substantial increase in bids, totaling N328.584 billion.
This robust participation in the October auction reflects an ongoing investor appetite for longer-dated instruments, which offer higher returns amid rising interest rates. The auction also witnessed higher marginal rates, a sign of investor expectations for increased yields in the face of inflation and tighter monetary policies.
