Nigeria’s first domestic dollar-denominated bond adds N1.47 trillion to the country’s total domestic debt, according to the latest Debt Management Office (DMO) report.
The bond accounts for 2.12% of Nigeria’s total domestic debt stock, which stands at N69.22 trillion as of September 30, 2024. This issuance represents a significant step in the Federal Government’s strategy to diversify funding sources and attract foreign investments. Unlike naira-denominated securities, this bond provides investors exposure to Nigeria’s economy without the currency risk associated with naira fluctuations.
Nigeria’s domestic debt performance shows mixed results in the latest quarter. In dollar terms, domestic debt declines by 5.34%, dropping from $48.45 billion in June to $45.87 billion in September. However, in naira terms, domestic debt rises by 3.10%, increasing from N71.22 trillion to N73.43 trillion.
- FGN Bonds: The largest component of domestic debt, Federal Government bonds, grows by 4.47%, reaching N54.65 trillion in September, up from N52.32 trillion in June. This category now makes up 78.95% of total domestic debt, up from 78.13% in the previous quarter.
- Nigerian Treasury Bills: The second-largest component, Treasury Bills, drops by 0.66% to N11.73 trillion, down from N11.81 trillion in the previous quarter. This decline aligns with efforts to reduce short-term debt and mitigate rollover risks.
- Promissory Notes: These government-issued instruments, used to settle obligations, increase by 5.80%, rising from N1.67 trillion in June to N1.77 trillion in September.
- FGN Sukuk: Federal Government Sukuk, an instrument for infrastructure financing, decreases by 9.14%, falling to N992.56 billion from N1.09 trillion.
- FGN Savings Bonds: These retail-focused bonds record a 16.11% increase, reaching N64.09 billion, indicating rising interest from individual investors.
- Green Bonds: This environmentally focused debt instrument remains unchanged at N15 billion, accounting for just 0.02% of total domestic debt.
Nigeria’s Dollar Bond Generates Strong Investor Demand
Nigeria’s first domestic dollar-denominated bond attracts over $900 million in subscriptions, surpassing expectations.
- The $500 million bond, coordinated by the Africa Finance Corporation (AFC), signals growing investor confidence in Nigeria’s capital market.
- The five-year bond, issued at par with a 9.75% annual coupon, records a 180% subscription rate.
- The high demand reflects strong domestic and international interest in Nigeria’s economic growth potential.
Investor Profile and Government Response
Investors in the bond include local Nigerians, non-Nigerians residing in the country, Nigerians in the Diaspora, and major institutional investors.
The Ministry of Finance describes the bond issuance as a landmark achievement positioning Nigeria as a leader in financial innovation in Africa. Finance Minister Wale Edun highlights the bond’s strategic role in the government’s broader financial strategy.
Proceeds from the bond go toward critical infrastructure projects and development programs, aimed at boosting Nigeria’s economic growth and enhancing long-term fiscal stability.
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