The Federal Government of Nigeria (FGN) has successfully raised ₦346.155 billion in its latest bond auction conducted on November 18, 2024. The auction, organized by the Debt Management Office (DMO), showcased strong investor interest despite offering fewer bonds than the previous month.
Auction Highlights
- Bonds Offered: Reopenings of the 19.30% FGN APR 2029 (5-Year Bond) and the 18.50% FGN FEB 2031 (7-Year Bond).
- Total Offered Amount: ₦120 billion (₦60 billion per bond category).
- Total Allotted Amount: ₦346.155 billion.
- 5-Year Bond: ₦63.530 billion.
- 7-Year Bond: ₦282.625 billion.
This reflects a 33% reduction in bond offerings compared to October 2024, when ₦90 billion per category was on offer.
The auction attracted a 208% subscription rate, with bids totaling ₦369.585 billion, exceeding the ₦120 billion offered:
- 5-Year Bond: ₦75.560 billion subscription (up from ₦60.737 billion in October).
- 7-Year Bond: ₦294.025 billion subscription (down from ₦328.584 billion in October).
The marginal rates for the bonds also increased:
- 5-Year Bond: Rose to 21.00% from 20.75%.
- 7-Year Bond: Rose to 22.00% from 21.74%.
The higher marginal rates reflect tightening liquidity conditions and underscore the Federal Government’s ability to attract robust investor interest in fixed-income instruments like bonds amid evolving economic pressures.
Implications and Fiscal Outlook
The higher allotments and marginal rates signal strong investor confidence but also indicate rising borrowing costs for the Federal Government. This underscores the need for careful allocation of funds to critical sectors with high economic returns to maximize the effectiveness of public expenditure.
The November 2024 bond auction demonstrates Nigeria’s ability to secure funding despite challenging economic conditions. However, the sustained rise in borrowing costs highlights the importance of prudent fiscal management to balance investor interest with national economic priorities.
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