The Federal Government of Nigeria raised N374.751 billion during its August 2024 FGN bond sale. The Debt Management Office (DMO) announced the auction results on its website. In August 2024, allotments increased by 66.05% from the previous month’s total of N225.714 billion, following a three-month decline.
Although the overall bond offer fell by 36.67% to N190 billion for the August auction, total subscriptions increased by 64.57% to N460.182 billion. The auction, held on August 19, 2024, drew high investor interest, indicating a restored market for government debt instruments, particularly those with longer maturities. Investors’ continued interest towards longer tenors in August drove the overall higher subscription levels.
Breakdown of the Auction Result
This auction featured three distinct bonds with tenors of 5 years, 7 years, and 9 years, marking a critical moment in Nigeria’s efforts to secure funding for ongoing national projects.
- 19.30% FGN APR 2029: The 5-year bond, offering a coupon rate of 19.30%, received a lukewarm response from investors, with a subscription level of only N24.349 billion, significantly below the offered amount of N70 billion. As a result, N18.349 billion was allotted at a marginal rate of 20.30%. This undersubscription by 65.22% suggests that investors are less interested in shorter-tenor bonds, likely due to their lower yield and shorter duration.
- 18.50% FGN FEB 2031: The 7-year bond saw moderate interest from investors, with a subscription of N60.750 billion, just shy of the offered amount of N70 billion. Ultimately, N42.189 billion was allotted at a marginal rate of 20.90%. This bond, with a coupon rate of 18.50%, was undersubscribed by 13.21%, indicating a fair level of confidence in medium-term government securities, though not as robust as the demand for longer tenors.
- 19.89% FGN MAY 2033: The 9-year bond emerged as the clear favourite among investors, with a subscription of N375.083 billion, despite the lower offered amount of N50 billion. The bond was allotted N314.213 billion at a marginal rate of 21.50%, reflecting a significant oversubscription of 650.17%. This bond’s appeal lies in its longer tenor and higher yield, which appear to align with investors’ strategies to secure higher returns in a potentially volatile economic environment.
What you should know
The demand for FGN bonds fell for three months, from May to July 2024. However, the auction result for August 2024 looks to indicate continued interest.
As usual, investors prefer longer-term bonds, as indicated by the overwhelming demand for the 9-year bond. This preference could be motivated by a desire to lock in greater yields over time, especially in the face of future inflationary pressures and economic uncertainties.
The lower subscription rates for 5- and 7-year bonds, on the other hand, indicate that investors are wary of committing cash to shorter-term products. The marginal rates—ranging from 20.30% for the 5-year bond to 21.50% for the 9-year bond—indicate that the government is willing to offer competitive returns to attract funding.
Moreover, the success of this auction provides the government with a critical infusion of funds, which can be directed toward infrastructure development, debt servicing, and other essential national projects. It also signals to the market that Nigeria remains an attractive destination for investment, even as it navigates complex economic challenges.
