FG plans to raise N120 billion in November bond auction 

The Federal Government of Nigeria, through the Debt Management Office (DMO), has announced the issuance of bonds worth N120 billion for November 2024.

This represents a 33.3% decrease compared to the N180 billion raised in the previous month.

It is also one of the lowest amounts offered this year, as the Federal Government seems to slow down on bond offerings.

The 33.3% reduction in November indicates a shift in borrowing strategy, possibly reflecting reduced funding needs or improved revenue inflows.

Breakdown of the November bond auction 

• The November bond auction comprises two re-openings of existing bonds: the 19.30% FGN APR 2029 (5-year Re-opening) and the 18.50% FGN FEB 2031 (7-year Re-opening), with each valued at N60 billion.

• Both offerings are expected to attract significant interest from investors due to their attractive coupon rates, reflecting the current yield environment.

• The auction is scheduled for November 18, 2024, with settlement set for November 20, 2024. Units are offered at N1,000 per unit, subject to a minimum subscription of N50,001,000, in multiples of N1,000.

The bonds qualify as securities in which trustees can invest under the Trustee Investment Act. They also enjoy tax exemptions under the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA), making them attractive for pension funds and institutional investors.

Additionally, the bonds are listed on the Nigerian Exchange Limited and the FMDQ OTC Securities Exchange, ensuring tradability and liquidity.

What you should know 

Nairametrics earlier reported that the Federal Government secured N289.597 billion from its October 2024 bond auction.

• This auction, held on October 21, featured two re-opened tranches of existing bonds: the 19.30% FGN APR 2029 (5-year bond) and the 18.50% FGN FEB 2031 (7-year bond).
• Despite the inflationary pressures facing the country, the auction attracted robust investor interest, resulting in a higher allotment.
• The government initially offered N180 billion in the October auction, with N90 billion allocated to each bond. This was slightly lower than the N190 billion offered in September, which was distributed across three bonds—the 5-year, 7-year, and 9-year tenors.

Despite offering a lower amount, the total allotment for October surged to N289.597 billion, highlighting heightened investor demand for government securities.

• The 5-year bond (APR 2029) attracted N60.737 billion in subscriptions, while the 7-year bond (FEB 2031) saw a significant jump in bids, totalling N328.584 billion.
• There was a sharp increase in investor engagement, rising to N389.321 billion in October from the N293.097 billion subscription recorded in September.
• The high level of participation reflects investors’ sustained appetite for longer-dated instruments, which offer better returns in a rising interest rate environment.

The October auction witnessed a notable increase in marginal rates, reflecting investors’ expectations for higher yields amid inflation concerns and tighter monetary policies.