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Debt Management Office to sell N90bn bonds

By on February 5, 2015

The Federal Government is planning to raise N90bn ($475m) in sovereign bonds with maturities ranging between five and 20 years at its next regular auction on February 11, the Debt Management Office has said.

The debt office said on Tuesday it would auction N35bn worth of the five-year bond, N30bn of the 10-year paper and N25bn of the 20-year debt note, using the Dutch Auction System.

The five-year debt note is a fresh issue, while the 10-year and 20-year bonds are the re-opening of the previously issued paper. Results of the auction would be expected to be announced the following day, the debt office said in a notice.

The WSTC Financial Services Limited had said the yields on fixed-income securities such as bonds and Treasury bills would remain attractive this year as the government was expected to borrow more.

Another factor expected to keep the yields high, according to the company, is the maintenance of tight monetary stance by the Central Bank of Nigeria

Analysts at the WSTC, Olutola Oni and Motunrayo Giwa, in a report titled: ‘Nigeria: 2014 Economic Review and 2015 Outlook’, said the yield on the 10-year sovereign bond stood at 13.10 per cent at the commencement of 2014 and surged by 217 basis points to close the year at 15.27 per cent, as foreign investors repatriated capital and exited Nigerian assets amid weak macro-economic outlook and burgeoning political risks.

“We expect yields in the fixed income market to remain attractive in 2015. Our position is informed by our expectation of aggressive government borrowing (on account of shrinking revenue) and maintenance of tight monetary stance by the CBN,” they said.

They further said they believed that the tight monetary stance of the CBN aimed at attracting foreign capital in the face of higher country risk premium (the fallout of weak macro fundamentals and heightened political uncertainty) and market reaction to the normalisation of rates in the United States would sustain high yields in fixed income securities.