Federal Gov’t Plans First $500m Bond Issue, As DMO Auctions N190bn FGN Bonds

Federal government is set to auction Series 1 of its first ever domestic dollar bond worth $500 million on Monday.

This is as the Debt Management Office will be issuing three tranches of FGN bonds worth N190 billion on Monday.

The bond, unveiled Thursday through the Debt Management Office (DMO), will be accessible to a broad range of investors, with a minimum investment amount of $10,000, with additional investments allowed in increments of $1,000. This structure is intended to enable wider participation among investors both within Nigeria and the diaspora.

“This bond issuance is more than just a financial instrument; it is a strategic move to channel funds into sectors that will catalyse economic growth,” Wale Edun, minister of finance and coordinating minister of the economy, said at the roadshow in Lagos.

The bond issuance will be listed on platforms such as the Nigerian Exchange and FMDQ, making it accessible to a variety of investors. The principal will be repaid after five years, with interest payments made every six months. This structured repayment schedule is designed to provide confidence to investors.

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The FGN Bonds issuance includes the reopening of a five-year N70 billion bond alongside reopenings of seven- and nine-year bonds, each valued at N70 billion and N50 billion each.

At the last auction in July, DMO sold N378 billion across the three bonds offered, with the stop rates of the longest tenure at 20.45 percent.

DMO sold double the N100 billion offered on its longest offer (a nine-year bond) as investors locked in on a 21.98 per cent yield at its auction today.

“The market is trying to look for a higher yield, ”Olaolu Boboye, lead economist at CardinalStone Securities Limited, said.

Preference was given to the long-dated tenor (new nine-year bond) selling N200.65 billion, 100 percent higher than offered with an oversubscription of N241.65 billion.

A total of N225.72 billion FGN bonds was sold at the auction today; the amount sold was less than the auctioned N300 billion FGN bonds across three tranches. It included a reopened nine-year bond and five and seven tenures at N100 billion each.

Yield on the long-dated instrument increased to 21.98 percent at today’s sales from 21.50 percent in the previous auction.

The stop rates of the five- and seven-year bonds also grew to 19.89 and 21.00 from 19.64 and 20.19 percent reported at the last auction, respectively.

This is marginally less than the stop rate on the one-year Treasury bill considered less risky than longer-dated bonds.

CardinalStone, in its midyear outlook, reported that fixed income yields are currently high and probably unsustainable and advised investors to invest in long-dated instruments.

“With improved production from the Dangote refinery, the world’s largest single-train facility, the price of diesel is expected to crash to about N900 per litre while long queues at filling stations are tapped to end.”