The Federal Government of Nigeria, through the Debt Management Office (DMO), announces plans to raise N120 billion in its November 2024 bond auction. This amount represents a 33.3% decrease compared to the N180 billion raised in October, suggesting a possible shift in borrowing strategy or improved revenue inflows.
Breakdown of the November Bond Offering
The bond auction scheduled for November 18, 2024, includes two re-openings of existing bonds: the 19.30% FGN APR 2029 (5-year re-opening) and the 18.50% FGN FEB 2031 (7-year re-opening). Each bond tranche is valued at N60 billion. These offerings are expected to attract substantial interest from investors due to their competitive coupon rates, aligning with current market yields.
Investors can purchase these bonds at N1,000 per unit, with a minimum subscription requirement of N50,001,000, in multiples of N1,000. Settlement for the auction is set for November 20, 2024. These bonds are eligible for investment under the Trustee Investment Act and benefit from tax exemptions as per the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA). Additionally, the bonds are listed on the Nigerian Exchange Limited and the FMDQ OTC Securities Exchange, ensuring their liquidity and tradability.
Indications of a Strategic Adjustment
The reduction in the November bond issuance points to a potential adjustment in the government’s borrowing approach, possibly driven by lower funding needs or enhanced fiscal revenues. The N120 billion offering is one of the lowest amounts issued this year, indicating a more cautious stance on debt accumulation.
Insights from October Bond Auction
In the previous month, the government raised N289.597 billion through its October 2024 bond auction, exceeding the initial N180 billion target. The auction featured two re-opened bond tranches: the 5-year (19.30% FGN APR 2029) and the 7-year (18.50% FGN FEB 2031), which attracted robust investor participation.
The October auction saw a surge in total subscriptions, reaching N389.321 billion, compared to N293.097 billion in September. This heightened demand reflects investors’ strong appetite for longer-term government securities, which offer attractive returns amid a rising interest rate environment.
Higher participation in the October auction also led to increased marginal rates, indicating market expectations for higher yields in response to inflationary pressures and tighter monetary policies.
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