DMO to raise N450bn in April bond auction

THE Debt Management Office (DMO) is seeking to raise N450 billion in its bond auction billed to take place on April 15.

The move was in line with the agency’s plan to raise up to N1.8 trillion through FGN bonds in the second quarter (Q2) of 2024.The secondary bond market witnessed mild demand at the two days trading week, with interest concentrated at the short and mid-papers. Analysts observed the yields at the tail end of the curve are lower than the short and mid-tenors, suggesting the market expect lower inflation soon. Thus, the average benchmark yield declined by 67bps week-on-week to 19.18% In Q1 2024, the DMO raised N2.39 trillion through FGN bonds, with the largest issuance occurring in February.

The DMO also issued N418.2 billion of FGN bond in January, N1.49 trillion worth of FGN bonds in February, with interest rates hitting 19% for the 10-year bonds.

In March, the DMO issued N475.7 billion at bumper interest rates, with rate hitting 20.45% on the 10-year bond.In the latest offering, the DMO is offering N150 billion for the new FGN APR 2029 five-year bond.It is offering N150 billion for the reopened FGN FEB 2031 17-year bond and N150 billion for the FGN FEB 2034 10-year bond.

The auction will take place on April 15 and the settlement date is April 17.

FGN bonds are auctioned every month through the DMO, with the interest paid semi-annually.

They are subject to a minimum subscription of N50,000,001 and in multiples of N1,000 thereafter.

FGN bonds are recognized as investment instruments for trustees under the Trustee Investment Act.

They receive tax exemption benefits for pension funds because they’re considered government securities, as per the guidelines in the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA).

On the other hand, the US dollar or foreign currency-denominated bonds were sold by Nigeria’s debt management office (DMO) two weeks ago, at a private auction last week for a 21percent  premium, raising approximately N2.4 trillion for the monetary authority – the Central Bank of Nigeria to sell remaining FX forward obligation.

The DMO held its March 2024 bond auction earlier this week, offering a total of N450.0 billion for three instruments: the reopening of 18.50% FEB 2031 and 19.00percent FEB 2034, as well as 19.94% FGN MAR 2027 (new issue).

According to the auction result, the FEB 2031 bond was undersubscribed with a bid-to-offer ratio clearing at 0.3x. The authority offered N150 billion in bond paper to market participants. The DMO sold debt paper valued at N47.9 billion at a 20% stop rate, from N51.8 billion in subscriptions that were received.

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