In the first half of 2024, the Federal Government raised around N4.13 trillion from bond sales. The FMDQ Exchange Financial Markets Monthly Report for June 2024 disclosed this.
The value of the newly issued FBN bonds in June was N297.01bn, the lowest amount in the previous six months; the biggest amount was N1.49tn in February. The value of the FGN bonds issued was N418.20 billion in January, N608.86 billion in March, N628.81 billion in April, and N682.07 billion in May.
The total value of outstanding FGN bonds, which includes savings and green bonds, was N26.22 trillion at the end of June 2024, up almost 44.49 percent from N18.15 trillion at the end of the same period in June 2023.
Regarding the bond issue in February, the Debt Management Office said the relatively large amount offered was based on the FGN’s financing needs, the opportunity to attract foreign investors, and the premise that some local investors may be able to access pools of funds.
In February, the Federal Government issued two FGN bonds: a N1.25 trillion 10-year bond that matures in 2034 and a N1.25 trillion seven-year bond that matures in 2031.
The overall number of bids received was N1.9tn, which is the most it has ever received in a single FGN Securities Auction. A total of N1.49tn was allocated, with N873.53bn going toward the seven-year bond and N621.38bn going toward the 10-year bond.
Seven bonds were reopened in the second quarter: two were reopened in April (FEB 2031 and FEB 2024), two were reopened in May (APR 2029 and FEB 2031), and all three of the June bonds (May 2033, which was issued one month earlier) were reopened.
The interest rates on the bonds ranged from 18.50 percent to 19.89 percent. As of May, the DMO has an outstanding N1.5tn to raise from the Federal Government’s proposed N6tn bond, having already raked in N4.5tn from previous issuances.
The Director General of the Debt Management Office, Patience Oniha, at an interactive session with primary dealer market makers in Lagos, noted that domestic securities remained a major source of Federal Government spending.
She said, “Last year, we raised N7tn as new domestic borrowing. It speaks to the size of the domestic market, its resilience, and its sophistication, unlike what we have in many African markets.
“Out of the new domestic borrowing of N6tn, we have raised N4.5tn. For the Ways and Means, out of N7tn approved for securitization, we have raised N4.9tn.”
Since the beginning of the year, investors have shown interest in the long-term FGN bond. The report on capital importation for Q1 2024, released by the National Bureau of Statistics, showed that it rose to the pre-pandemic high, hitting $3.38 billion in the first quarter of 2024, on the back of interest rate hikes in Nigeria and rate cuts in advanced economies.
A closer look at the report showed that foreign portfolio investment contributed the bulk of the total capital imported into Nigeria in Q1-2024, accounting for 61.5 percent higher than the 28.5 percent contribution in Q4-2023.
Total FPI inflows stood at $2.1bn in Q1-2024, 570.1 percent higher than $309.8m in Q4-2023 and 219.7 percent higher than $649.3m in Q1-2023.
With the recent hike in the monetary policy rate by the Central Bank of Nigeria, analysts were of the view that it would lead to an upward repricing of fixed-income instruments, especially short-term assets, ranging from Treasury bills to commercial papers, which would naturally make these investments more attractive to investors compared to stocks.
“This trend is evident from the recent Treasury bills auction, where the average stop rates across all instruments rose by 172 basis points to 20.0 percent. Additionally, we anticipate an elevated yield in the bond market, though at a moderate pace.
“Conversely, pressure on interest expense and profit margins could dull the outlook on corporate earnings, leading to subdued equity sentiment—oother things equal. This might be a push factor in the fixed income space, while attractive yields pull investors in,” analysts at Afrinvest said in their weekly market report.
Meanwhile, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, said that Nigeria planned to issue a diaspora bond of up to $500 million as part of its strategy to stabilise and grow the economy.
