No foreigners no problem, as Nigeria holds another successful local bond auction

The Debt Management Office (DMO) held another successful auction of Federal government bonds on Wednesday, when it offered N150 billion but attracted more than two times the offering with a total bid of N334 billion and is now a short crawl from raising its full-year target of N2.34 trillion, after raising N2.19 trillion in the first nine months of the year.

The successful outing is despite the fact that Foreign Portfolio Investors (FPIs) again seem to have stayed away from the auction. Foreigners have largely stayed away from local bond auctions this year due to the foreign exchange challenges in the country.

Foreign investors also have a number of liquid debt markets internationally from which to choose which offer higher real returns and that has softened appetite for Nigeria’s local bonds.

“This was another commendable effort by the DMO,” analysts at FBN Quest said in a note to clients on Friday.

“Having collected NGN1.66 trillion (gross) from FGN bond sales in 2020, it has been set a record domestic funding target of NGN2.34 trillion this year and has now collected NGN2.19 trillion in nine months from the sale of FGN bonds including non-competitive bids from public agencies,” the analysts said.

The DMO offered the same menu of debt instruments (ten, 20 and 30 year benchmarks) for the third month in succession.

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The marginal stop rates for the two shorter tenor bonds were unchanged although the March 2050 bond widened by 20 basis points to 13 percent.

Analysts say the successful outing of the DMO this year leaves it well placed to hit the target for the year even without the small sums it makes from the sale of other instruments.

The assumption is that the target is not being adjusted in light of the NGN980 billion supplementary budget.

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