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Nigeria raises N122 bln bond at first debt auction in 2021, raises yields by 1.87%

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BY Oludare Mayowa

 

Nigeria increased yields on its domestic bonds at the first debt auction of the year by an average of 1.87 percentage points, sending a signal to the market on the direction of returns on local debt.

Results of the bond auction released by the Debt Management Office (DMO) showed that the government raised less cash than anticipated in spite of the hike in yields on the debt.

A total of N122.36 billion was raised at the auction across the three tenor paper on offer, lower than the N150 billion the debt office initially advertised to offer at the auction.

The debt office sold N57.93 billion worth of the 15-year bond, N7.93 billion more than it initially offered at the auction. The bond was sold at 8.74 percent compared with 6.94 percent it was sold at the last auction in 2020.

Also, N49.40 billion was raised from the sales of the 10-year bond, N 60 million short of the announced offer and at 7.98 percent. The 10-year paper was last offered at the November auction.

A total of N15.03 billion was sold in the 25-year paper at 8.95 percent against 7 percent at the December auction. The debt office also sold less than the N50 billion it initially proposed to sell.

Investors oversubscribed to the bond with total subscriptions of N238.28 billion across the three tenor paper, but demand was heavier on the 15-year paper.

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Investors piled up a total of N106.37 billion on the 15-year paper while the DMO sold only N57.93 billion worth of the bond.

Nigeria has proposed a budget expenditure of N13.58 trillion for the year with an overall budget deficit of N5.60 trillion, which represents 3.93 percent of GDP.

According to the Finance and Budget Minister, Zainab Ahmed, this year’s deficit is to be financed mainly by borrowings, which includes N2.34 trillion from the domestic sources, N2.34 trillion from foreign sources, N709.69 billion from multi-lateral/bi-lateral loan drawdowns and Privatisation Proceeds of N205.15 billion.

The government is also spending N3.32 trillion on debt service, which is equal to 24.5 percent of total expenditure, and 12.6 percent higher than 2020 revised Budget.

 

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