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Monday, July 22, 2024

FG falls short of bond target, raises N1.5tn instead of N2.5tn

Debt Management Office Attributes Lower Than Expected Turnout to Unprecedented Market Dynamics

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The Nigerian Federal Government’s ambitious plan to raise N2.5 trillion through bonds at its February auction encountered a setback as it fell short of its target, managing to raise only N1.5 trillion.

In a press release issued by the Debt Management Office (DMO) on Tuesday, it was revealed that the 2031 bond received a total allotment of N873.53 billion, while the 2034 bond stood at N621.38 billion.

Last week, the government sought to borrow N2.5 trillion via bonds, marking its second foray into the fixed-income market this year.

The offerings comprised N1.25 trillion with a maturity date of February 2031 and another N1.25 trillion with a 10-year tenor, both newly created bonds and offered at a unit price of N1,000.

The statement highlighted, “In an unprecedented development, the Debt Management Office raised N1.495 trillion in Federal Government of Nigeria bonds at its monthly auction for February 2024. The DMO offered a N1.25 trillion 7-year FGN bond maturing in 2031 and another N1.25 trillion 10-year FGN bond maturing in 2034.”

Despite receiving total bids of N1.9 trillion, the highest in any single FGN Securities Auction, only N1.495 trillion was allotted, with N873.53 billion allotted for the 2031 FGN bond and N621.38 billion for the 2034 FGN bond.

The DMO attributed the relatively large offering to the FGN’s financing needs, the opportunity to attract foreign investors, and the expectation that some local investors could access pools of funds.

Previously, in January, the DMO offered four 10-year reopened bonds totaling N360 billion, raising approximately N418.197 billion from the auctioned bonds.

The shortfall in the bond target underscores the complexities of the financial market and the challenges the government faces in meeting its financing objectives amidst evolving economic dynamics.

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