FG plans to raise N120 billion in bond auction in November

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

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

This is also one of the lowest amounts offered this year as the Federal Government appears to be slowing bond offerings.

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

Distribution of November bond auction

The November bond auction includes two reopenings of existing bonds: 19.30% FGN APR 2029 (5-year Reopening) and 18.50% FGN FEB 2031 (7-year Reopening) worth N60 billion each.

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

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

Bonds qualify as securities in which trustees may invest under the Trustee Investment Act. They also benefit from tax exemptions under the Company Income Tax Act (CITA) and Personal Income Tax Act (PITA), making them attractive to pension funds and institutional investors.

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

What you need to know

Nairametrics was previously the Federal Government’s N289.597 billion raised from bond auction in October 2024.

This auction, held on October 21, featured two reopened tranches of existing bonds: 19.30% FGN APR 2029 (5-year bond) and 18.50% FGN FEB 2031 (7-year bond).
Despite inflationary pressures facing the country, the auction attracted strong investor interest, resulting in a higher allocation.
The government first 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 and distributed across three bonds, namely 5-year, 7-year and 9-year maturities.

Although a lower amount was offered, the total allocation for October increased to N289.597 billion, indicating increased demand for government securities by investors.

The 5-year bond (April 2029) attracted N60.737 billion in subscriptions, while the 7-year bond (February 2031) saw a significant increase in bids, totaling N328.584 billion.
There was a sharp increase in investor participation, rising from N293.097 billion subscribers recorded in September to N389.321 billion in October.
The high level of participation reflects investors’ continued appetite for longer-dated instruments that provide better returns in a rising interest rate environment.

The October auction saw a significant increase in marginal rates, reflecting investors’ expectations for higher returns due to inflation concerns and tight monetary policies.