FG raises N264.5bn in bond auction as subscriptions amid rates decline

The Nigerian Federal Government raised N264.527 billion at its September bond auction, according to the Debt Management Office (DMO).

Held on September 23, 2024, the auction reopened three Federal Government of Nigeria (FGN) bonds: the 19.30% APR 2029 (5-year bond), 18.50% FEB 2031 (7-year bond), and 19.89% MAY 2033 (9-year bond).

Compared to August, the September auction saw a 9.8% drop in total subscriptions, down from N460.182 billion to N414.881 billion.

The largest decline occurred in the 9-year bond, where subscriptions fell from N375.083 billion in August to N337.347 billion in September. The amount allotted also decreased significantly, from N374.751 billion in August to N264.527 billion in September—a 29.4% reduction.

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Despite lower allotments, investor demand for longer-dated bonds remained robust, particularly for the 9-year bond, which garnered N337.347 billion in bids against an offer of N50 billion, with N230.716 billion allotted at a marginal rate of 20.05%.

Economic analysts view the drop in marginal rates across all bond tenors as a positive sign for the government. The 5-year bond’s marginal rate decreased from 20.30% in August to 19.00% in September, while the 7-year and 9-year bonds saw decreases of 4.35% and 6.74%, respectively.

Financial expert Dr. Tony Osho commented, “The lower rates reflect improved borrowing conditions for the government, which could ease its debt servicing costs.”

While the decline in subscriptions and rates may indicate investor caution due to broader economic conditions, the strong demand for longer-term bonds highlights that government securities are still viewed as a safe investment.