In the first half of 2024, the Federal Government raised approximately N4.13tn from bond issuances.
According to The PUNCH, this information was disclosed in the FMDQ Exchange Financial Markets Monthly Report for June 2024.
June saw the lowest bond issuance value of N297.01bn in six months, while February had the highest at N1.49tn.
In other months, the values were N418.20bn in January, N608.86bn in March, N628.81bn in April, and N682.07bn in May.
As of June 2024, the total outstanding FGN bonds, including savings and green bonds, reached N26.22tn, marking a 44.49% increase from N18.15tn in June 2023.
The February issuance involved the Federal Government offering a N1.25tn seven-year bond maturing in 2031 and a N1.25tn 10-year bond maturing in 2034.
The Debt Management Office reported total bids of N1.9tn, the highest ever received in an FGN Securities Auction. Allotments were N873.53bn for the seven-year bond and N621.38bn for the 10-year bond, totaling N1.49tn.
In the second quarter, seven bonds were reopened: two in April, FEB 2031 and FEB 2024, two in May, APR 2029 and FEB 2031), and three in June, APR 2029, FEB 2031, and MAY 2033, which was initially issued in May. Interest rates on these bonds ranged from 18.50% to 19.89%.
By May, the DMO had an outstanding amount of N1.5tn to raise from the Federal Government’s proposed N6tn bond issuance, having already secured N4.5tn.
At an interactive session in Lagos, DMO Director General, Patience Oniha, emphasized the importance of domestic securities for Federal Government spending.
She stated, “Last year, we raised N7tn as new domestic borrowing. It speaks to the size of the domestic market, its resilience, and its sophistication, unlike 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 securitisation, we have raised N4.9tn.”
Investors have shown a strong interest in long-term FGN bonds since the beginning of the year.
The National Bureau of Statistics’ report on capital importation for Q1 2024 revealed a rise to $3.38bn, attributed to interest rate hikes in Nigeria and rate cuts in advanced economies.
Foreign portfolio investment significantly contributed to this, making up 61.5% of total capital imported into Nigeria in Q1 2024, a sharp increase from 28.5% in Q4 2023.
Total FPI inflows were $2.1bn in Q1 2024, up 570.1% from $309.8m in Q4 2023 and 219.7% from $649.3m in Q1 2023.
The recent hike in the Monetary Policy Rate by the Central Bank of Nigeria is expected to lead to an upward repricing of fixed-income instruments.
Analysts at Afrinvest noted, “This trend is evident from the recent treasury bills auction, where the average stop rates across all instruments rose by 172bps to 20.0 per cent. Additionally, we anticipate an elevated yield in the bonds market, though at a moderate pace. Conversely, pressure on interest expense and profit margins could dull the outlook on corporate earnings, leading to subdued equities sentiment — other things equal. This might be a push factor to the fixed income space, while attractive yields pull investors in.”
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, announced plans to issue a diaspora bond of up to $500m in the third quarter.
This bond aims to attract investment from Nigerians abroad and demonstrate the economy’s strength amidst ongoing reforms.
