The federal government in first half (H1) of 2022 has raised a total of N1.84trillion through the FGN bond market to finance the N6.26trillion 2022 budget deficit, as disclosed by the Debt Management Office (DMO) in its FGN Bond auction results.
The FGN bonds are debt securities of the Federal Government of Nigeria (FGN) issued by the debt office on behalf of the Federal Government and it has the obligation to pay the bondholder the principal and agreed interest as and when due.
It also indicated that Pension Funds Administrators (PFAs), and Nigerian investors prefer investment instruments with less volatility that assures them of their capital returns albeit with low yield on investment.
The raised N1.84 trillion by DMO from local investors represents an increase of 29.8per cent compared to N1.42trillion FGN bond raised in H1 2021.
As gathered by THISDAY from the DMO’s FGN bond auction result, February 2022 has one of the amount raised by government, while January has the lowest amount raised.
The February auction result for the 12.50% FGN JAN 2026 (Re-opening, 10-Year Bond) & 13.00% FGN JAN 2042 (Re-opening, 20-Year Bond) recorded allotted amount worth N415.42billion (inclusive Non-Competitive Allotment), while auction result for January’s 12.50% FGN JAN 2026 (Re-opening 10-Year Bond) & 13.00% FGN JAN 2042 (New Issue 20-Year Bond) recorded N170.64billion allotted amount by the debt management office.
However, the FGN Bond auction result issued by DMO revealed that the total amount offered between January and June 2022 increased to N1.2 trillion as against N900 billion offered between January and June 2021.
The FGN bonds issued by DMO in the first H1 2022 have recorded oversubscription despite mixed interest rates.
The DMO in H1 2022 offered N1.2trillion FGN for subscription and it was oversubscribe by N3.02trillion, which is 39.8per cent or N1.82trillion oversubscription rate.
The monthly breakdown of FGN Bond revealed that DMO on behalf of the Federal government offered for subscription N225 billion worth of FGN bonds by auction in June 2022.
The bonds were listed in three tranches: N75 billion – 13.53% FGN Mar 2025 (10-yr Re-opening); N75 billion – 12.50% FGN Apr 2032 (10-yr Re-opening) and N75 billion – 13.00% FGN Jan 2042 (20-yr Re-opening).
For May, the debt office had issued a similar bond worth N225 billion for subscription by auction in May 2022. The bonds were also issued in three tranches with 13.53%, 12.5%, and 13% for the 10-year reopening bond, 10-year reopening bond, and 20-year reopening bond respectively.
Meanwhile in April, the DMO offered three new FGN bonds valued at N225 billion for subscription through auctions.
They are a N75 billion FGN bond at 13.5 per cent interest rate, due in March 2025 (10-year re-opening) and a N75 billion FGN bond, due in April 2032 (10-year new issue).
The bond issuance was auctioned in three tranches with a 13.53% FGN Mar 2025 bond programme seeking to raise N75 billion, which gathered a total subscription book of N108.43 billion across 87 bids, with a marginal rate of 10.00%.
In the same vein, the second bond programme, the 12.5% FGN Apr 2042 bond raised a total subscription of N78.22 billion across 227 bids, representing an N3.22 billion oversubscription on the offered amount of N75 billion with a marginal rate of 12.50%.
The DMO in April re-opened 13.00% FGN Jan 2042 (20-year bond) bond programme with an offer of about N75 billion, which gathered a total subscription book of N222.76billion across 113 bids and finally allotted N79.68billion to investors.
The 13.00 per cent comes with a marginal rate of 12.90%.
For March, FGN bond issuance recorded an oversubscription of N448.42 billion over the intended N150 billion offered by the DMO.
The bond issuance was auctioned in two tranches with a 12.5% FGN Jan 2026 bond programme seeking to raise N75 billion, which gathered a total subscription book of N231.02 billion across 97 bids, with a marginal rate of 10.1500%.
In the same vein, the second bond programme, the 13% FGN Jan 2042 bond raised a total subscription of N367.40 billion across 141 bids, representing an N157.32 billion oversubscription on the offered amount of N75 billion with a marginal rate of 12.700%.
However, in February, the FGN bond issuance by the DMO recorded an oversubscription of N407.72 billion over the intended N150 billion
The bond issuance was auctioned in two tranches with 12.5% FGN Jan 2026 bond programme seeking to raise N75 billion, which gathered a total subscription book of N325.40 billion across 230 bids with a marginal rate of 10.95per cent
The second bond programme, the 13% FGN Jan 2042 bond raised a total subscription of N232.32 billion across 151 bids, representing a N157.32 billion oversubscription on the offered amount of N75 billion with a marginal rate of 13per cent.
In addition, FG bond issuance for the month of January 2022 by the DMO recorded an oversubscription of N175. billion to stand at N170.64 billion despite only seeking to raise N150 billion its 20-year bond issuance.
DMO issued two tranches of bonds in its first issuance for the year, reopening its 12.50% FGN Jan 2026 bond and issuing a new 13.00% FGN Jan 2042, which is set to mature by 2042.
The breakdown of the report by DMO revealed that the first tranche was oversubscribed by N36.19 billion with subscriptions of N111.19 billion, surpassing the offered amount of N75 billion, while the second tranche was oversubscribed by N139.05 billion over the N75 billion offered amount.
The federal government had highlighted that the 2022 budget has debt deficit of N6.26trillion, forcing the federal government to issue new borrowings of N5.012 trillion (of which domestic – N2.506 trillion and foreign – N2.506 trillion); drawdowns on Project-tied Multilateral/Bilateral loans – N1.156 trillion; and Privatisation Proceeds of N90.73 billion.
With the added new debts to the debt stock, it is expected that the country’s total debt stock going to hits N45.86trillion by December 2022.