In a move to raise local funds to finance the N6.26 trillion 2022 budget debt, the federal government has borrowed N984.28 billion through FGN bonds between January and April 2022, FGN bond auction result released by the Debt Management Office (DMO) has revealed.
FGN bonds are debt securities/ liabilities of the Federal Government of Nigeria (FGN) issued by the debt office on behalf of the federal government. The FGN should pay the bondholder the principal and agree to interest as and when due.
The 2022 budget has a deficit of N6.26 trillion, forcing the federal government to issue new borrowings of N5.012 trillion (domestic – N2.506 trillion and foreign – N2.506 trillion); drawdowns on Project-tied Multilateral/Bilateral loans – N1.156 trillion; and Privatisation Proceeds of N90.73 billion.
With the added new debts to the debt stock, it is expected that the country’s total debt stock going is to hit N45.86 trillion by December 2022.
The N984.28billion raised by DMO from local investors represents an increase of 43.66 percent compared to the N685.16 billion FGN bond raised in the first four months of 2021.
The appetite for FGN bonds indicates that Pension Funds Administrators (PFAs) and Nigerian investors prefer investment instruments with less volatility that assures them of their capital returns, albeit with a low yield on investment.
The FGN Bond auction result issued by DMO revealed that the total amount offered between January and April 2022 increased to N675billion as against N600 billion offered between January and April 2021.
The DMO’s FGN bond auction result showed that the N225 billion offered in April 2022 is the highest. The raised amount in April was N219.88billion.
The DMO in the first three months of 2022 offered N150 billion, while the amount raised eventually was N764.4billion, attributable to investors’ oversubscription.
The monthly breakdown revealed that FG bond issuance for the month of January 2021 by the DMO recorded an oversubscription of N175.24 billion to stand at N170.64 billion despite only seeking to raise N150 billion in its 20-year bond issuance.
DMO issued two tranches of bonds in its first issuance for the year, reopening its 12.50 percent FGN Jan 2026 bond and issuing a new 13.00% FGN Jan 2042, which is set to mature in 2042.
The breakdown of the report by DMO revealed that the first tranche was oversubscribed by N36.19 billion with subscriptions of N111.19 billion, surpassing the offered amount of N75 billion, while the second tranche was oversubscribed by N139.05 billion over the N75 billion offered amount.
However, in February, the FGN bond issuance by the DMO recorded an oversubscription of N407.72 billion over the intended N150 billion.
The bond issuance was auctioned in two tranches with a 12.5% FGN Jan 2026 bond program seeking to raise N75 billion, which gathered a total subscription book of N325.40 billion across 230 bids with a marginal rate of 10.95per cent.
The second bond program, the 13% FGN Jan 2042 bond, raised a total subscription of N232.32 billion across 151 bids, representing an N157.32 billion oversubscription on the offered amount of N75 billion with a marginal rate of 13per cent.
For March, FGN bond issuance recorded an oversubscription of N448.42 billion over the intended N150 billion offered by the DMO.
The bond issuance was auctioned in two tranches with a 12.5% FGN Jan 2026 bond program seeking to raise N75 billion, which gathered a total subscription book of N231.02 billion across 97 bids marginal rate 10.1500 percent.
In the same vein, the second bond program, the 13% FGN Jan 2042 bond, raised a total subscription of N367.40 billion across 141 bids, representing an N157.32 billion oversubscription on the offered amount of N75 billion with a marginal rate of 12.700 percent.
In addition, FGN bond issuance for April 2022 recorded an oversubscription of N184.46 billion over the intended N225 billion offered by the DMO.
The bond issuance was auctioned in three tranches with a 13.53 percent FGN Mar 2025 bond program seeking to raise N75 billion, which gathered a total subscription book of N108.43 billion across 87 bids, a marginal rate of 10.00 percent.
In the same vein, the second bond program, the 12.5 percent FGN Apr 2042 bond, raised a total subscription of N78.22 billion across 227 bids, representing an N3.27 billion oversubscription on the offered amount of N75 billion with a marginal rate of 12.50 percent.
The DMO in April reopened the 13.00 percent FGN Jan 2042 (20-year bond) bond program with an offer of about N75 billion, which gathered a total subscription book of N222.76billion across 113 bids and finally allotted N79.68billion to investors. The 13.00 percent comes with a marginal rate of 12.90 percent.
