Nigerian government targets N150 billion from bond market by September 2024 to bridge budget deficit

In a bid to bridge the 2024 budget deficit, the federal government is targeting N150 billion from the bond market by September 2024.

The auction by the Debt Management Office (DMO) is scheduled for September 23, 2024 and will be settled on September 25, 2024 and is one of the smallest bond offerings in 2024 as it is about 21% lower than the N190 billion offered in August 2024.

The bonds offered are a reopening of previously issued instruments. The bonds include 5-year bonds with an interest of 19.30% FGN APR 2029 (5-year bonds) with an interest of 18.50% FGN FEB 2031 (7-year bonds) with an interest of 19.89% FGN MAY 2033 (9-year bonds) with an interest of 30 billion N.

The total offering of N150 billion, though smaller than previous offerings this year, reflects the government’s measured approach to borrowing given its financial needs and weakening demand.

The bonds will be sold in units of Rp1,000,000, with a minimum purchase of Rp50,001,000, and then in multiples of Rp1,000,000.

This relatively high threshold is designed to attract institutional investors such as pension funds, insurance companies and other large financial institutions, although high net worth individuals can also participate.

READ ALSO: Nigeria’s debt to reach N121 trillion in Q1 2024 – DMO

The bonds have competitive interest rates with coupon payments of 19.30%, 18.50%, and 19.89% for the 5-year, 7-year, and 9-year bonds, respectively, making them attractive to investors seeking yield.

With maturities of 5, 7 and 9 years, these bonds offer investors options for medium to long term investment horizons.

The Federal Government of Nigeria (FGN) bond auction settlement date is scheduled for September 25, 2024. This is the date when successful bidders will make payment for the bonds allocated to them and will officially receive their bond certificates.

The bonds will pay interest semi-annually, with full repayment scheduled on their respective maturity dates. The bonds are fully backed by the full faith and credit of the Federal Government of Nigeria and secured by the country’s public assets, enhancing their appeal to a wide range of investors.

The bonds are also listed on the Nigerian Stock Exchange and FMDQ OTC Stock Exchange, providing liquidity to investors through potential secondary market trading. In addition, the bonds qualify as investable securities by trustees under the Trustee Investment Act and are classified as liquid assets for banks under the liquidity ratio requirements.

By: Babajide Okeowo

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