Lower T-Bills Rates to Spur Corporate Bond Issuance—DMO

Patience Oniha DMO
Image Credit: LoveWorld Plus

By Adedapo Adesanya

Director-General of the Debt Management Office (DMO), Ms Patience Oniha, has disclosed that there could be an influx of corporate organisations in the local bond market next year.

She said this could be spurred by the gradual decline in stop rates of treasury bills at both the secondary and primary markets as witnessed at the last sale of the debt instrument two weeks ago.

On Wednesday, October 30, 2019, the Central Bank of Nigeria (CBN), on behalf of the debt office and the Federal Government of Nigeria (FGN), auctioned T-bills to traders at the primary market.

During the exercise, the bank auctioned the bills in three different tenors; 91-day, 182-day, and 364-day maturities. The central bank cleared the 91-day tenor at 9.50 percent against 10.80 percent it sold the bill at the previous sale held on Wednesday, October 16, while the 182-day tenor went down to 10.45 percent from 11.00 percent , with the 364-day tenor dropping to 11.50 percent from 12.94 percent.

Tomorrow, Wednesday, November 13, 2019, the central bank will again conduct another PMA and it is anticipated that rates would further depreciate during the exercise as a result of rush for the instrument.

Speaking with reporters in Lagos at a recent function organised by FMDQ, Ms Oniha said if the rates keep falling, corporate organisations might be lured to sell bonds to investors at lower rates.

“If rates drop as we saw at the [last] treasury bills auction and they remain like that, then there would be more corporate bonds next year,” she told newsmen at the event.

According to her, “One of the constraints of bond issuance by corporate organisations was interest rate. So, when interest rates are lower, it then means they can access more funds.”

“Why would they (companies) access more funds,” the debt office boss rhetorically asked. “Of course, to expand their business,” she answered, adding that when their businesses grows, “their GDP (Gross Domestic Product) grows and their revenue grows [also] because of bonds will paid and there will be companies in contract. It is an economic cycle.”

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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