Investors oversubscribe FGN bond by N407.7bn in February

Nigeria’s FGN bond issuance for the month of February 2022 by the Debt Management Office (DMO) recorded an oversubscription of N407.7 billion over the intended N150 billion offered by the DMO.

This is according to the February 2022 FGN Bond auction result, released by the Debt Management Office.

The bond issuance was auctioned in two tranches with 12.5% FGN Jan 2026 bond programme seeking to raise N75 billion, which gathered a total subscription book of N325.4 billion across 230 bids with a marginal rate of 10.95%.

In the same vein, the second bond programme, the 13% FGN Jan 2042 bond raised a total subscription of N232.32 billion across 151 bids, representing a N157.32 billion oversubscription on the offered amount of N75 billion with a marginal rate of 13%.

Compared to the bond issued in the previous month, the marginal rate for 12.5% FGN Jan 2026 dropped from 11.5% recorded in January 2022 to 10.95% in the review month.

The bonds were auctioned on 16th February 2022, with the settlement date set at 18th February 2022.

The tenors for the two bonds are 10-year and 20-year with maturity dates of 22nd January 2026 and 21st January 2042 respectively.

The 10-year bond recorded 46 successful bids out of the total 230 bids, while the second tranche recorded 119 successful bids out of the total 151 bids.

According to the February auction performance report, successful bids for the 12.50% FGN JAN 2026 & 13.00% FGN JAN 2042 were allotted at the Marginal Rates of 10.95% 10.75% – 13%. and 13.00%, respectively. However, the original coupon rates of 12.5000% for the 12.5000% FGN JAN 2026 and 13.0000% FGN JAN 2042 will be maintained.

Meanwhile, the amount allotted for the first tranche was N103.47 billion compared to the total subscription of N325.4 billion, while the second bond had an allotment of N193.92 billion as opposed to the N232.32 billion registered.

The oversubscription in the instrument despite the drop recorded in the interest rates, indicate that Nigerian investors prefer investment instruments with less volatility that assures them of their capital returns albeit with low yield on investment.

With more volatile instruments like the equities market, cryptos, amongst others, Nigerians have little option as to where to put their monies with guaranteed returns, hence, the rally at the local debt market.

Recall that the FGN Savings Bond is a safe instrument and is backed by the full faith and credit of the federal government.