FG plans to raise N120 billion at the bond auction in November

The Federal Government of Nigeria, through the Debt Management Office (DMO), has announced the issuance of bonds worth N120 billion by November 2024.

This represents a decline of 33.3% compared to the N180 billion raised the previous month.

It is also one of the lowest amounts offered this year as the federal government appears to be slowing bond offerings.

The 33.3% decline in November signals a shift in credit strategy, possibly due to reduced financing needs or improved revenue inflows.

November bond auction breakdown

The November bond auction includes two reopenings of existing bonds: the 19.30% FGN APR 2029 (5-year reopening) and the 18.50% FGN FEB 2031 (7-year reopening), each valued at N60 billion.

Both offerings are expected to attract significant investor interest due to their attractive coupon rates, which reflect the current yield environment.

The auction is scheduled for November 18, 2024, with settlement on November 20, 2024. Units are being offered at N1,000 per unit, with a minimum subscription of N50,001,000, in multiples of N1,000.

The bonds qualify as securities in which trustees can invest under the Trustee Investment Act. They also enjoy tax exemptions under the Corporate Tax Act (CITA) and the Personal Income Tax Act (PITA), making them attractive to pension funds and institutional investors.

Furthermore, the bonds are listed on the Nigerian Exchange Limited and the FMDQ OTC Securities Exchange, ensuring tradability and liquidity.

What you need to know

Nairametrics previously reported that the federal government has secured N289.597 billion through the October 2024 bond auction.

This auction, held on October 21, included two reopened tranches of existing bonds: the 19.30% FGN APR 2029 (5-year bond) and the 18.50% FGN FEB 2031 (7-year bond).
Despite the inflationary pressures facing the country, the auction attracted strong investor interest, resulting in a higher allocation.
The government initially offered N180 billion in the October auction, with N90 billion allocated to each bond. This was slightly lower than the N190 billion offered in September, which was spread over three bonds: the five-year, seven-year and nine-year maturities.

Despite being offered a lower amount, the total allocation for October rose to N289.597 billion, underscoring increased investor demand for government bonds.

The 5-year bond (APR 2029) attracted N60.737 billion in bids, while the 7-year bond (FEB 2031) saw a significant increase in bids, reaching a total of N328.584 billion.
There was a sharp increase in investor engagement, which rose to N389.321 billion in October from the September enrollment of N293.097 billion.
The high level of participation reflects continued investor interest in longer-term instruments, which offer better returns in an environment of rising interest rates.

The October auction witnessed a notable rise in marginal interest rates, reflecting investor expectations for higher returns amid inflation concerns and tighter monetary policy.