Nigeria Plans to Borrow N385bn via Local Bonds
The Federal Government is planning to borrow between N315bn and N385bn ($1bn-$1.26bn) in the first quarter of the year through sales of naira-denominated bonds, the Debt Management Office has said.
The DMO stated on Friday that it would auction bonds maturing in 2021 and 2027 and introduce a new seven-year bond, Reuters reported. It said the 2021 and the 2027 were benchmark bonds that were being currently traded. The debt office said its issuance programme had been structured to ensure that funds required by the government to finance its budget deficit were provided during the year.
The Federal Government issues sovereign bonds monthly to support the local bond market, create a benchmark for corporate issuance and fund its budget deficit. The government is planning to borrow N850bn offshore to help part-finance the 2018 budget. It also expects $700m to come from international sources, the portion of 2017’s funding that it has yet to raise.
The DMO raised $2.8bn from the international market last year, selling $2.5bn in Eurobonds in November and another $300m via Diaspora bonds earlier. Meanwhile, the Federal Government is planning to raise N110bn by selling sovereign bonds with maturities of five and 10 years on January 24, according to the DMO. The debt office had said on Wednesday that it would raise N50bn with the five-year bond and N60bn with the 10-year paper, using the Dutch auction system, according to Reuters.
The bonds are re-openings of previous issues and the result of the auction is expected to be published on January 26, according to the DMO. The $3bn Eurobond bond launched in December was oversubscribed by nearly four-fold, the government said. The bonds yields were offered around 6.75 per cent for the 10-year instrument while the 30-year paper was at 7.875 per cent, according to the information from the country’s debt office.
The Governor, Central Bank of Nigeria, Mr. Godwin Emefiele, had described investor confidence in the country as stemming from the positive direction of most of the economic indicators, and also supported by the decisions of both the monetary and fiscal authorities.
“There is confidence by the investor community about what the Government is doing and it delights us that the level of confidence has improved, and hence you have seen that the activities of the monetary and fiscal authorities have led to the country exiting recession,” he had said.
Meanwhile, the naira closed flat at 364 per United States dollar at the parallel market on Friday, despite the injection of over $460m into the interbank foreign exchange market by the CBN during the week.
This latest injection came barely two trading days after the CBN injected $262.5m into the inter-bank foreign exchange market. The CBN had injected $210m and $262.5m into the forex market separately on Monday and Wednesday, respectively. The local currency had closed at 363/dollar at the parallel market in the past two weeks.
Traders said volumes were low but foreign investors have resumed selling, which will help boost dollar liquidity on the currency market. On the official market, it was quoted at 305.80, supported by the CBN’s regular intervention. The naira closed at 363/dollar at the parallel market last Friday. The CBN on Monday offered $100m to authorized dealers in the wholesale segment of the market, while the Small and Medium Enterprises segment received the sum of $55m.