The Federal Government will auction medium to long-term bonds valued at N150 billion.
This is part of government’s efforts to access debt capital from the domestic capital market to bridge declining revenues and restructure the general balance of the national debt stock
The Debt Management Office, which oversees Federal Government’s debt issuances and management, will undertake a primary market auction by reopening three bonds with tenors ranging from seven to 29 years.
The DMO is offering N50 billion each across its 13.98 per cent FGN February 2028, 12.40 per cent FGN March 2036 and 12.98 per cent FGN Mar 2050 bonds.
The term-to-maturity or tenors of the bonds are six years and six months, 14 years and seven months and 28 years and seven months. The previous stop rates for the bonds were 12.35 per cent, 13.15 per cent and 13.25 per cent respectively.
Analysts said they expected the coupons or rates at the PMA to “adjust further” given the recent trend in the market.
Analysts expected investors to concentrate on the PMA, but advised investors to position in attractive yields across all maturities.
Sustained buying interests in sovereign debts in recent period have been forcing yields downward. Last week, average yield in the secondary bond market dropped by 38 basis points to close 11.56 per cent from 11.94 per cent two weeks ago.
According to Afrinvest Securities, the average yield in the short-end of the curve fell the most, contracting 62 basis points to open this week at 9.30 per cent from 9.92 per cent in previous week.
Average yield in the long-end of the curve also dipped by 33 basis points to open this week at 11.56 per cent while the average yield at the mid-end of the curve shed 26 basis points to open at 12.06 per cent.
DMO, Director-General, Patience Oniha on Monday said as a result of poor performance in revenue, there would be an increased borrowing.
She spoke in Abuja during the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper interactive session with the House Committee on Finance.
According to her, much as government has been conservative in projecting revenue, it will still be underperforming in revenue.
“So, it means that we are relying increasingly on borrowings to finance the activities of the government.
“And if you look at the figures from last year when the budget was revised because of COVID-19, we can see that the borrowing levels are going higher. So, what that means is that the debt stock as expected will keep rising and debt service will also keep increasing, as shown in the presentation.
“I just thought I should highlight that, that this is primarily where the debt stock is growing from, and the debt service, which means that we are also servicing, taking from the revenue which has not grown as expected.
I thought I should highlight that because there is a lot of concern about debts. But really, this is the source and we can see the trend,” Oniha said, corroborating earlier presentation by the Minister of Finance, Budget and National Planning, Hajia Zainab Ahmed.
She outlined that looking at where the public debt stock is and what it is projected to be, based on the new borrowings provided for in the MTEF; debt stock will grow naturally, same for debt-to-GDP ratio too.
“The committee may be aware that early this year, the public debt to GDP ratio was increased to 40 per cent primarily because of the increases in new borrowings and other activities of government. So, debt to GDP will also grow over the period but we are still within the limit of 40 per cent that was approved in February,” Oniha said.