FG to Pay Local Bond, T-Bills Investors N2.2trn Interest in 2021

August 25, 2020
FGN Eurobond

By Dipo Olowookere

Domestic investors who purchased the various government debt securities in Nigeria will receive interests valued at N2.2 trillion next year, the federal government has disclosed.

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, confirmed this development in a document she personally signed a few days ago.

In the FGN 2021 budget call circular to the various Ministries, Departments and Agencies (MDAs), the Minister said in the year, the government plans to specifically use the sum of N2.183 trillion for domestic debt service, while N940.89 billion would be used to pay interests on foreign loans, including from China and others.

Business Post reports that to raise funds locally, the federal government usually sells different bonds and treasury bills to investors. The debt securities are purchased in Naira, while for the Dollar-denominated securities; it sells the Eurobonds and gets the other foreign funds, especially from international lenders, paid directly into the account of the Central Bank of Nigeria (CBN).

According to the Debt Management Office (DMO), as at March 31, 2020, Nigeria’s total debt profile stood at N28.6 trillion, about 4.4 per cent quarter-on-quarter increase from N27.4 trillion as at December 31, 2019.

A breakdown showed that domestic debt accounted for 65.1 per cent amounting to N18.6 trillion ($51.6 billion), while external debt made up for the remaining 34.9 per cent, which translates to N9.9 trillion ($27.7 billion).

To raise funds to finance budget deficits, the government issues the monthly FGN bonds, monthly FGN savings bond, Sukuk and bi-monthly sale of treasury bills.

Last Wednesday, the federal government auctioned N150 billion worth of FGN bonds to domestic investors spread across four different maturities of which it received bids worth N242.3 billion and allotted N126.2 billion to successful bidders.

This week, precisely on Wednesday, the apex bank will sell treasury bills worth N197.6 billion to local investors at the primary market, while early next month, the FGN savings bonds will likely be offered for sale.

In 2021, the government plans to spend N12.7 trillion out of which N7.5 trillion is expected to be from revenue generated internally, with the deficit to be financed through loans from both local and foreign sources.

Borrowing locally has been cheaper lately. As at two weeks ago, the CBN sold the T-bills to investors for as low as 1.20 per cent.

Dipo Olowookere

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

Mr Olowookere can be reached via [email protected]

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