FG rakes in N374bn from August bond auction
By Esther Agbo
In a turn of events, the Federal Government of Nigeria successfully raised N374.751 billion through its August 2024 bond auction, as investor appetite showed a notable shift toward longer-tenor securities.
The auction, managed by the Debt Management Office (DMO), marks a sharp rebound in investor demand following a three-month decline in bond allotments, the total amount allotted in August 2024 was 66.05 percent higher than the previous month.
Despite a 36.67 percent reduction in the total bond offer, which was set at N190 billion for August, the auction saw a 64.57 percent surge in subscriptions, reaching N460.182 billion.
This contrasts with the previous month’s total allotment of N225.714 billion, underscoring a renewed interest in government debt instruments.
The auction offered three bonds with varying maturities, 5, 7, and 9 years each reflecting different levels of investor interest.
The 9-year bond emerged as the clear standout, with a staggering subscription of N375.083 billion against an offered amount of just N50 billion.
This bond was ultimately allotted N314.213 billion at a marginal rate of 21.50 per cent, indicating an oversubscription of over 650 per cent.
In contrast, the 5-year bond, with a 19.30 percent coupon rate, received a lukewarm response, garnering just N24.349 billion in subscriptions, significantly below the offered amount of N70 billion.
As a result, N18.349 billion was allotted at a marginal rate of 20.30 percent, leading to an undersubscription by 65.22 per cent.
Similarly, the 7-year bond attracted moderate interest, with subscriptions just under the offered amount, signalling a more cautious approach by investors towards medium-term investments.
The bond was allotted N314.213 billion at a marginal rate of 21.50 percent, reflecting a significant oversubscription of 650.17 per cent.
This bond’s appeal lies in its longer tenor and higher yield, which appear to align with investors’ strategies to secure higher returns in a potentially volatile economic environment.
The robust demand for the 9-year bond highlights a strategic shift among investors, who are increasingly seeking to lock in higher yields over an extended period, likely as a hedge against inflation and economic volatility.
This trend suggests a growing confidence in the government’s ability to manage long-term economic challenges, despite ongoing uncertainties.
On the other hand, the subdued interest in shorter-tenor bonds reflects investor caution, with many opting to avoid the lower yields and shorter durations in favour of potentially more lucrative long-term investments.
The success of this bond auction provides the Nigerian government with a crucial influx of funds, which can be allocated toward infrastructure projects, debt servicing, and other key national initiatives.
Moreover, the auction’s outcome signals that Nigeria remains a viable destination for investment, even amid economic headwinds.
