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Debt Management Office sells N75 Billion Bonds

By on October 19, 2012

Director General, DMO, Abraham Nwankwo

The Debt Management Office (DMO) on Thursday acquired N75 billion from the sale of bonds due to mature in 2017, 2019 and 2022.

The duration for the debt instruments issued was for 5 years to mature in 2019, 7 years for 2019 and 2022 for 10 years tenure, profits rose by 71 pints.

 

According to the DMO’s website, the October 2012 FGN bond auction, the debt office sold at 13.68 per cent, translating to N15 billion in 5-year bond compared with 12.93 per cent last month, 13.74 percent for 7-year and 13.74 percent for 10-year bond as well as 13.50 per cent, translating to N30 billion.

 

The 7-year bond was given at 12.90 per cent before, while the debt office for the last time issued the 10-year note at 15.90 per cent at the August auction.

 

The FGN bond was incorporated in the JP Morgan’s Government Bond directory for up-and-coming markets (GBI-EM) on October 1, stimulating an early speedy fall in yields in local bond as financiers took positions.

 

According to the bank, the enclosure in the JP Morgan index is likely to draw about $1.5 billion in offshore investment in the local bond market.

 

Compared with last month’s Total subscription for the fixed income security, which was N82.94 billion, this month’s was N144.32 billion

 

Relatively, forecasters at Renaissance Capital (RenCap) have said lowering domestic debt in the 2013 appropriation bill, which was opened to the National Assembly last week, would cause less growing load on interest rates.

 

“Nigeria’s share of domestic debt in total debt (at 80 per cent) is significantly higher than the government’s policy target of 60 per cent. The budget plan proposes turning this around by adopting a domestic debt strategy that, for the first time, will pay off Nigeria’s domestic debt instead of rolling it over.

 

“To this end, a sinking fund of N100 billion ($63 million) will be set up in 2013 that will be used to repay maturing debt obligations and stem the rise in domestic debt. New domestic borrowing will also moderate to N727 billion in 2013, from N744 billion in 2012. We expect a slowdown in domestic borrowing to ease upward pressure on interest rates, which we view as positive for credit growth.”

 

“Nigeria’s growing infrastructure deficit has exerted pressure on the government to increase the share of capital expenditure in the budget. To this end, the president proposes issuing a $1 billion Eurobond in 2013 to raise funding for capital spending on infrastructure in the power and gas sectors. We believe that the challenge for the government will not be in raising infrastructure funding, but in implementing the capital expenditure budget,” RenCap argued.