Investors Expect Higher Rates as FG Sells N225bn Bonds Today

By Aduragbemi Omiyale

Bonds worth N225 billion are expected to be sold to investors on Monday, July 18, 2022, by the federal government to raise funds for the 2022 budget deficit.

The exercise would be conducted by the Debt Management Office (DMO) on behalf of the Federal Government of Nigeria (FGN) at the primary market segment of the domestic capital market.

According to a circular issued by the DMO to notify traders of the PMA, the notes would be offered in three tenors of 10 years (first issued seven years ago), 10 years and 20 years at N75 billion each.

Intending subscribers would be expected to purchase the paper for N1,000 per unit subject to a minimum subscription of N50 million and in multiples of N1,000 thereafter, with interest to be paid twice a year.

Business Post gathered that investors would be anticipating higher rates from the debt office, especially with the latest inflation figures released by the National Bureau of Statistics (NBS).

The nation’s stats organisation last week said inflation in Nigeria increased by 18.60 per cent in June, triggered by increases in the prices of goods and services caused by rising prices of petrol and food items.

At the last exercise, the DMO had to increase the rates to attract more investors, especially when it observed that one of the maturities recorded a low subscription rate and a similar action would be expected today to keep the subscriptions high.

Traders are showing a strong appetite for any asset class that could help them beat inflation and with the equities market offering them an option of earning more through interim dividends in the coming weeks, trimming their investments in debt instruments, though risk-free, will not be a difficult decision to make at the moment if the coupon rate is not attractive enough.

For the debt office, it will not want to take any risk to chase away traders from the market, especially when it could not sell the much-anticipated $1.2 billion Eurobond a few months ago due to pricing issues. The next place to get such funds would be the local debt market and that can be possible if the rates are okay with favourable.

Rates cleared at 10.10 per cent, 12.50 per cent and 13.15 per cent for the same respective papers to be issued today at the last exercise.