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HomeTop NewsNigeria sells N662.6 bln at domestic bonds auction, its record single debt...

Nigeria sells N662.6 bln at domestic bonds auction, its record single debt sales

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By Oludare Mayowa

Nigeria raised a total of N662.6 billion from the domestic debt market on Monday, the country’s largest single bond sale at an auction, as investors seek higher yields on their investments and market liquidity surges help to drive demand.

This record debt increase demonstrates Nigeria’s growing reliance on domestic borrowing to fund its budget deficit.

According to the Debt Management Office’s (DMO) debt auction details, demand for local debt was higher in the April 2049 maturing bonds, which also had the highest sales.

Analysts said investors’ interest in the bonds auction was boosted by the search for higher yields following the Central Bank of Nigeria’s (CBN) interest rate hike last week.

The regulatory bank’s Monetary Policy Committee (MPC) raised its benchmark interest rate by 100 basis points to 17.5 percent last week in an effort to contain rising inflation.

They also claim that the CBN’s new naira policy rate drew massive liquidity into the banking system, boosting demand at the debt auction.

READ ALSO: Oil prices extend losses on fear of interest rate hike, Russian increase crude supply

However, the yields on the bonds sold at the auction were relatively flat when compared to the returns at the December debt auction.

The yield on the April 2032 maturing bonds, on the other hand, closed at 14.90 percent, up from 14.75 percent in the previous auction.

The yield on the April 2037 paper was flat at 15.80 percent, while the yields on other maturities such as February 2028 and April 2049 were 14 percent and 15.90 percent, respectively.

Demand for the four tenors totaled N1 trillion at the auction, with investors purchasing N220.57 billion in April 2049 bonds, N232.46 billion in April 2037 paper, N65.04 billion in April 2032 bonds, and N144.53 billion in February 2028 paper.

At the auction, the debt office offered N90 billion for each of the four tenor bonds but received more than it bargained for.

Nigeria projected to spend N21.83 trillion in 2023 out of which it is expected to raise about N11.34 trillion deficit to cover the revenue gap in the budget.

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