Investors in the bond market oversubscribed the federal government of Nigeria’s 30-year bonds by over 300% when it was reopened on auction on Monday according to the results from the Debt Management Office (DMO).
The FGN bond maturing in 2053 recorded a total subscription of N330 billion, surpassing the N90 billion offered by the Debt Management Office of the country.
The 30-year bond had an interest rate of 15.70% but the range of bids carried an interest rate ranging from 15.70% to 20.0% with the yield being 18%- a record.
There were 211 bids for the FGN 2053 bonds with 206 being successful.
Performance of the FGN 10- and 15-year bonds
Also, shorter tenor notes such as 2029, 2033, and 2038 maturities were undersubscribed at the same auction, signalling a clear preference for the longer-dated debt. Additionally, the longer-dated debt was presented with a record yield.
The FGN 2029 bonds performed below expectation garnering a total of N34.7 billion against the N90 billion the DMO planned to raise.
A similar scenario played out in the FGN 2033 and 2038 bonds that raised N33 billion and N47 billion respectively rather than the N90 billion planned to be raised.
This means both offers were only able to raise 36% and 52% of the amount earmarked to raise.
Although the FGN 2053 bonds performed beyond expectation, the yield still falls below Nigeria’s inflation rate of 26.7%. Analysts warn that Nigeria’s negative real yields act as a deterrent to foreign investors, even as the government endeavours to attract capital by easing exchange controls and implementing other economic reforms.
A survey of economists by Bloomberg anticipates that Nigeria’s annual inflation rate will likely accelerate to 27.7% in October, as indicated by data scheduled for release later on Wednesday. This is an increase from the 26.7% recorded in September.
