By Bukola Idowu, Lagos
The Debt Management Office has so far raised N754.156 billion through the sales of the federal government bond as well as the savings bond which launched early this year to source funds from retail investors.
It had raised N750.8 billion through its monthly bond auctions between January and April and N3.356 billion through the Savings bond sales in March and April this year. While the DMO has been able to raise more than it set out to during the period, investors interest seems to be waning in the bond sales.
Compared to N645 billion which it planned to raise through its monthly bond sales from January through to April, the debt office had raised N750.8 billion despite a cumulative oversubscription of N1.097 trillion. It had raised the highest amount in January as investors interest in the longer tenured bond soared.
In January, the debt office had issued a five, 10 and 20-year bond raising N214.95 billion instead of the N130 billion it planned to. The 20-year bond was also the toast of investors at the February bond auction as it was oversubscribed to the tune of N139.9 billion. The DMO had allotted N70 billion of the 20-year bond as against N30 billion, bringing total funds raised through the February bond sales to N160 billion.
Although the debt office had upped the amount it was to raise at the bond sales in March to N130 billion from N110 billion it set for the February auction, it raised N160 billion with the 20-year bond still the toast of investors.
At the April bond auction, investors interest waned as the bond was undersubscribed. As against N135 billion which the debt office set out to raise, investors were willing to stake N129.47 billion on the FGN bonds with only N105.82 billion allotted.
The trend continued in May as only N110 billion was raised at the bond auction held last week as against N140 billion which it set out to raise. Also, the amount raised from the FGN Savings bond declined from N2.068 billion in March to N1.288 billion in April. The result of the May Savings Bond auction which closed last week is expected to be out this week.
Traders say the waning interest in FGN bond is due to liquidity crunch in the banking industry as well as the picking up of activities at the stock market. The bull had returned to the stock market as the Central Bank of Nigeria increased outflow of foreign exchange and also opened up an Investors and Exporters window, which uses a market determined price, allowing foreign investors to move funds in and out of the country easily.
With the N7.441 trillion budget passed by the legislative arm of the government last week higher than the N7.298 trillion which was submitted by President Muhammadu Buhari, Nigeria forecasts a budget deficit of N2.36 trillion in 2017, half of which it aims to fund through domestic borrowing.
The Debt Management Office (DMO) had launched the FGN Savings bond to help broaden the country’s funding base. It allows individuals to buy bonds at a retail volume with a minimum purchase of N5000 and multiples of N1000.
The March auction which was a two-year bond carries a coupon of 13.01 percent while the April auction had a two-year bond which carried a coupon of 12.794 per cent and a three-year bond which was sold at 13.794 per cent.