The federal government raised N225.714 billion at the bond auction held in July 2024, around 75% of its target amount given the declining market for short-term bonds.
The June bond sale raised approximately N297.006 billion last month; hence, this month’s total has decreased by a mere 24%.
In the most recent auction, the federal government put up a total of N300 billion for the three distinct bond tenors; however, the overall subscription for the FGN bond auction scheduled for July 2024 was N279.664 billion, an undersubscription of N20.336 billion.
The total sum awarded to winning bids in the auction during the undersubscription was N225.714 billion, which is marginally less than the entire subscription.
The Debt Management Office (DMO) disclosed the auction results, which show that investors were hesitant to purchase shorter-term bonds but showed a high interest in longer-term assets.
Breakdown of the Auction
Federal Government of Nigeria (FGN) bonds were reopened for three different periods at the auction: five years at 19.30% FGN APR 2029, seven years at 18.50% FGN FEB 2031, and nine years at 19.89% FGN MAY 2033. The 186 bids that were received in total for these bonds indicate a competitive interest and a moderate level of involvement.
30% FGN APR 2029 (5-Year Bond): There was a moderate amount of investor interest in the 19.30% FGN APR 2029 bond, which was a reopening of the 5-year bond. There were 21 bids on the N100 billion bonds that the federal government was offering. Eleven of these bids were successful, resulting in a N21.485 billion subscription.
The government allocated N18.885 billion for the bonds despite the low subscription. This bond was offered at a range of 18.5000% to 21.0000%, with a marginal rate of 19.8900%.
50% FGN FEB 2031 (7-Year Bond): Compared to the 5-year bond, investor interest in the 18.50% FGN FEB 2031 bond—a reopening of the 7-year bond—was significantly lower. The total number of bids received for the N100 billion that was up for grabs was 16. Only nine of these bids were successful, bringing the total subscription amount to N16.530 billion.
From this subscription, the government allocated N6.180 billion for the bonds. With a marginal rate of 21.0000%, the bid range for the 7-year bond was 16.0000% to 20.5900%.
89% FGN MAY 2033 (9-Year Bond): The 19.89% FGN MAY 2033 bond, a reopening of the 9-year bond, drew significant investor interest in sharp contrast to the shorter-term bonds. The bond attracted an astounding 149 bids despite the same N100 billion being offered. 117 of these bids were successful, resulting in a substantial N241.649 billion subscription.
In the end, the government allocated N200.649 billion, a sum that was significantly more than that of the bonds with five and seven years. With a marginal rate of 21.9800%, the offers for the 9-year bond ranged from 17.5000% to 23.0000%. Strong investor preference for longer-term securities is demonstrated by the notable oversubscription and high allotment, which is probably due to the greater returns and perceived stability over a longer time.
What to note
The results of the bond auction held in July 2024 reveal a significant trend in investor sentiment: a clear preference for higher-yielding, longer-tenor bonds.
This pattern is consistent with the overall state of the economy, as investors seek for government securities that offer steady and alluring returns.
Currently holding its meeting, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is expected to raise interest rates and yields for investors.
