FG sells five to 20-year bonds at 16.9%

The Federal Government through the Debt Management Office (DMO) sold five, 10 and 20-year bonds at a flat rate of 16.19 percent at an auction Wednesday. The DMO said the issuance of the bonds was to curtail borrowing costs and cash in on the declining inflation

The debt office noted that it raised a total of N99.26 billion ($315.11 million), less than the N140 billion it wanted to raise, as it did not want to pay more for the notes.

It sold N4.22 billion of the 2021 paper at 16.19 percent, compared with 16.30 percent last month and N30.25 billion of the 2027 paper at 16.19 percent against 16.29 percent in May, it said.

It also sold N64.79 billion of the 2037 paper at 16.19 percent, compared with 16.29 percent last month.

“Demand for the five-year bond dropped significantly because of lack of interest in the shorter end of the market, because most investors, especially the pension funds prefer to lock in on the longer tenor paper,” one fixed-income trader told Reuters.

He added that the 2037 maturing debt was viewed favourably in light of falling inflation in the West African country.

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Nigeria’s annual inflation eased for the fourth straight month in May, falling to 16.25 percent from 17.24 percent in April, while analysts expect further declines in the consumer price index this month.

Bids for of 14.50% FGN JUL 2021, 16.2884% FGN MAR 2027 and 16.2499% FGN APR 2037 were successful and were allotted at the marginal rates of 16.1900 %, 16.1900% and 16.1965%, respectively.

However, the original coupon rates of 14.50% for the 14.50% FGN JUL 2021, 16.2884% for the 16.2884% FGN MAR 2027 and 16.2499% for the 16.2499% FGN APR 2037 were maintained.