The Debt Management Office (DMO) of Nigeria has announced plans to raise N300 billion through two different local bonds with maturities of five and nine years. The auction is scheduled for next Monday.
Recently, the fixed-income market has been highly active, with increasing demand for naira-denominated assets. The growing interest in bonds and other fixed-interest securities has been fueled by a decline in Nigeria’s inflation rate, which recently fell below the benchmark interest rate.
However, analysts have warned that lower yields on government bonds could lead to capital flight, negatively affecting the economy.
According to a circular obtained by MarketForces Africa, the DMO has replaced the February 2031 bond with the May 2033 bond. At the upcoming auction, the DMO intends to raise N200 billion from the April 2029 bond and N100 billion from the May 2033 bond.
Experts predict that the auction will attract significant interest, with many investors eager to buy naira assets as inflation continues to decline. However, opinions are divided on the potential direction of bond yields, although a downward trend in yields on naira assets has been a common theme in the local debt market.
Banks and pension fund managers are expected to participate actively in the auction as the gap between interest rates and inflation widens. Federal Government of Nigeria (FGN) bonds are considered secure investments since they are backed by the full faith and credit of the Nigerian government and are charged against the nation’s general assets.
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