Nigeria to raise N150 bln via bonds on Aug 19 to fund budget gap
Nigeria has unveiled plans to sell a total of N150 billion worth of its sovereign bond at an auction next week as part of measures to raise funds to finance this year’s budget gap.
According to the Debt Management Office (DMO) notices to investors published on its website, Nigeria will raise N40 billion apiece in the 30-year and 15-year debt note at the auction, N25 billion worth of the 10-year paper and N45 billion of the 25-year tenor debt.
All the debt on sales are reopening of the previously issued paper, according to the debt office public notice.
“For Re-openings of previously issued bonds, (where the coupon is already set), successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus any accrued interest on the instrument,” the DMO said.
Nigeria issue bonds on a monthly basis to raise cash to plug the gap on its budget and also help set benchmark for local debt issuance.
The debt office plans to raise up to N1.5 trillion to support the government in financing this year’s budget and reduce the impact of the shortfall in revenue from crude oil exports and internally generated revenue.
Last month, the debt office sold a total of N178.52 billion worth of bonds at its auction, more than the N130 billion initially proposed while yields fell across the board at the auction compared with the previous month’s auction.
Analysts said the volume of liquidity in the market had helped increase demand at that last auction as investors seek value for their fund in secure assets.
Nigeria has projected to raise around N1.5 trillion from the domestic debt market to finance the gap in the revised 2020 budget of N10.81 trillion.
Bond sales by the debt office had continued to spur price discovery in the domestic debt market as some corporate continue to tap the market to raise funds to finance their operations.
Dangote Cement, MTN and United Capital are among private sector operators that have tap the debt market this year to raise funds to pay off debt and increase their working capital.
Dangote Cement in April raised N100 billion 5-year tenor commercial paper while MTN in June raised N100 billion worth on commercial paper in 180-day tenor and 270-day tenor under its debut CP programmer to boost its working capital.
The investment banking firm, United Capital also raised N5.3 billion in series one and two commercial paper to support the growth of its overall business.
Other corporate that have tapped the debt market this year, include; FCMB with N20 billion in commercial paper, Nigerian Breweries sold N48 billion while Union Bank sold N20 billion CP to fund operations.