A Satisfactory Bond Auction for the DMO
DMO offered N225bn but raised N229.2bn through re-openings of the 2025, 2032 and 2037 FGN bonds
The DMO held its monthly auction of FGN bonds on Monday (19 September ’22). It offered N225bn but raised N229.2bn (competitive allotment only) through re-openings of the 2025, 2032 and 2037 FGN bonds. The participation level was slightly lower when compared to the auction held in August.
The bid-to-cover ratio for September stood at 1.1x compared to 1.2x in August. The DMO secured a total bid of N246.4bn (USD564m) at the auction. The bids for the 3, 10 and 15-year benchmarks were allotted at the marginal rates of 13.5% (previously; 12.5%), 13.8% (previously; 13.5%) and 14.5% respectively.
The demand at this auction is partly driven by expected inflows of N166bn in coupon payments later this month as well as, improved system liquidity primarily driven by inflows of N185.8bn in FGN bond coupon payments in the first three weeks of September.
Coronation Merchant Bank’s economic research team note that market liquidity stood at a surplus of N28.3bn on Monday (20 September ‘22). Overnight and repo rates closed within a range of 9 – 11%.
The DMO had set out to raise N1.8trn through FGN bonds by end-Q3 ’22. However, yearto-date, it has raised N2.3trn, exceeding its target by 15% or N268bn. Considering the sale of other debt instruments such as NTBs and savings bonds, the DMO is on track pro rata to meet or exceed its domestic borrowing target (N3.53trn) for the year.
According to the DMO’s latest public debt report, total domestic debt increased by 5% q/q and 20.6% y/y to N26.2trn as at Q2. The increase can be partly attributed to increases in FGN bonds (6.7% q/q), NTBs (2.2% q/q) and FGN Savings bond (15.2% q/q).
FGN bonds accounted for 72.5% of total domestic borrowings in Q2. We maintain our view that the FGN is likely to depend on domestic borrowing to meet its fiscal deficit due to unfavourable external conditions.
Coronation Merchant Bank’s economic research team see mid-curve FGN bond yields around 13.0 – 14.0% and yields at the longer-end of the curve between 14.0% – 15.0% over the next one month. However, the level of system liquidity (impacted by items such as auctions, CRR debits/refunds, bond/NTB maturities, coupon payments and FAAC allocation) would also influence movement in yields.
Another Decent Bond Auction for the DMO
The DMO held its monthly auction of FGN bonds on Monday (20 March ’23). It offered N360bn (USD780.1m) but raised N563.2bn (USD1.2bn) through re-openings of the 13.98% FGN FEB 2028, 12.50% FGN APR 2032, 16.25% FGN APR 2037, and 14.80% FGN APR 2049 FGN bonds.
The participation level (demand) at this auction declined by -22.6% to N808.4bn (USD1.7bn) compared with N991.9bn (USD2.1bn) recorded in February ’23. The bids for the 5, 9, 15, and 27-year benchmarks were allotted at the marginal rates of 14.00% (previously 13.90%), 14.75% (previously 14.90%), 15.20% (previously 15.90%), and 15.75% (previously 16.00%) respectively. Bid-to-cover stood at 1.4x
YTD the DMO has now raised NGN1.9trn at its bond auctions, exceeding its borrowing target (via FGN bonds) by 58.3% in Q1 ’23. It is clearly on track pro rata to meet the target for H1 2023.
The MPC/CBN raised the policy rate by 50bps to 18% at its latest meeting held in March. Further tightening is expected to offset the upward risk in price development and narrow the real interest rate gap. There was a slight uptick in the average FGN bond yield following the 50bps rate hike. We note that MPR – Inflation is currently at -3.9%.
The domestic institutions are still the core buyers of the bonds, which accounted for 61.5% of the assets under management of the PFAs at end-December ‘22. Some foreign portfolio investors (FPIs) outside the payments pipeline may be tempted back into the market by a little more retracement. More likely in our view, the domestic institutions will again make the running and the FPIs will generally stick with less complicated trades with similar (or better) returns elsewhere.
Looking ahead we expect a small boost to system liquidity due to an FGN bond maturity, NTB maturity, bond coupon payments and an OMO maturity in April and May. These maturities and coupon payments collectively amount to N1.45trn. A slight moderation in the avenge yield of fixed income instruments is likely.
In H2 2023 liquidity is expected to reduce while domestic borrowing increases, potentially resulting in further upticks in yields. However, the level of system liquidity largely impacted by items such as auctions, CRR debits/refunds, bond/NTB maturities and coupon payments would influence the movement in yields.
Over the next month, we see the mid-curve FGN bond yields around 13.7% – 14.9% and yields at the longer end of the curve between 13.5% – 15.8%.
Nigeria Raises N724.9 Billion in February 2023 Federal Government Bond Auction
A total of 577 bids worth N724.9 billion were received for the N360 billion amount offered, with the total amount allotted being N771.56 billion.
The Debt Management Office (DMO) in Nigeria has announced that it raised N724.9 billion in the Federal Government bond auction held on February 13, 2023.
This marks a 100% increase compared to the previous year. A total of 577 bids worth N724.9 billion were received for the N360 billion amount offered, with the total amount allotted being N771.56 billion, Investors King reports.
Successful bids were allotted at marginal rates of 13.99%, 14.90%, 15.90%, and 16.00%, respectively, for the 10-year, 10-year, 20-year, and 30-year bonds. The auction was part of the DMO’s efforts to raise funds for the implementation of the Federal Government’s 2023 budget and to finance critical infrastructure projects across the country.
While Nigeria’s rising debt profile has been a topic of concern, the DMO has been actively promoting the issuance of FGN bonds as a means of diversifying the country’s funding sources and reducing its dependence on short-term borrowing.
The FGN bond market has grown significantly in recent years, with a wide range of maturities and attractive yields for investors.
The success of the February 2023 FGN bond auction highlights the continued strong demand for FGN bonds and the government’s commitment to meeting its funding needs through the capital markets.
The settlement date for the auction was February 15, 2023, and the bonds will mature between February 2028 and April 2049.
FCMB to Issue N30 Billion Series I Additional Tier 1 Bond
FCMB Group to borrow N30 billion from the debt market
FCMB Group Plc, one of Nigeria’s leading tier II financial institutions, has perfected plans to raise N30 billion from the debt market via bond issuance.
The group disclosed this in a statement signed by Funmi Adedibu, Company Secretary on Tuesday, January 24, 2023, and obtained by Investors King.
The N30 billion series I bond is an additional bond under the bank’s N300 billion debt issuance programme. The announcement was done after the group completed the registration of its N300 billion debt issuance programme with the Securities and Exchange Commission and received approval.
Debt issuance is a method used to raise funds by both the government and public companies through the sale of bonds to external investors.
In part, the statement reads, “the Issuance represents the first non-sharia local currency AT1 instrument to be issued in Nigeria and has received CBN’s no-objection.”
“FCMB Group will commence the book build in respect of the Series I Bond on January 24, 2023.”
First City Monument Bank (FCMB), a member of FCMB Group Plc, is a financial services holding company headquartered in Lagos. FCMB Group Plc has nine subsidiaries divided among three business groups: commercial and retail banking, investment banking, and asset and wealth management.
Binance on Chain Balance Stands at $64B Despite Investigation by U.S. Regulators
Huawei Records Decline in Profits For 2022 as US Sanctions, China’s Pandemic Impacts Earnings
Osinbajo Lauds China on Loans Offered to Africans, Repayment System
News4 weeks ago
Npower Pays November, December Stipends; Gives Update on Next Step
Finance2 weeks ago
Npower Release Update on Failed Payment, Send Validation Link to Affected Beneficiaries
Cryptocurrency4 weeks ago
90 Million People Use Cryptocurrency in Nigeria – Report
Technology4 weeks ago
Africa Emerges as The Worst Performing Region in Internet Value
Fintech4 weeks ago
Nigerians Turn to Digital Banks as Traditional Banking Apps Face Challenges
Billionaire Watch3 weeks ago
Aliko Dangote, Johann Rupert Sit Atop Africa’s Forbes Richest Persons List in 2023
Government4 weeks ago
INEC Considers Postponement of Governorship and State Assembly Elections Amidst Legal Battles
Government4 weeks ago
FG Estimates N869bn For 2023 Census, Seeks Financial Aid