Nigeria’s DMO sold $225m naira-denominated bonds

Nigeria sold N45 billion (about $225 million) worth of naira-denominated bonds maturing in 2020 and 2034 at an auction last week.


The Director General of the Debt management Office (DMO)

Dr. Abraham Nwankwo, the Director-General, Debt Management Office (DMO)

The Debt Management Office (DMO) said it paid higher yields than its previous auction in August.


The amount raised at the auction was short of the N70 billion initially proposed by the debt office.


Traders said the DMO was constrained by the higher yields that investors demanded and reduced the amount of debt sold.


Investors had asked for yields ranging from 13.5 per cent to 20 per cent for the 2020 bond and 14.5 per cent to 20 per cent for the 2034 debt, but the DMO decided to cut off the sale at 15.95 per cent and 15.97 per cent respectively.


The DMO sold N20 billion worth of 2020 debt at 15.95 per cent yields, 57 basis points more than the 15.38 per cent at the last auction in August.


A total of N25 billion worth of the 2034 bond was sold at 15.97 per cent against 15.19 per cent last month.


Investors submitted bids worth N121.20 billion, lower than the 153 billion naira at the last auction.


Traders said the auction showed the government was no longer willing to borrow at higher yields, especially in the near term.


“The Central Bank of Nigeria (CBN) and the DMO have decided to cap interest rates on borrowing at below 16 per cent in the near term, and this should signal an end to volatility in the debt market,” a one dealer said.

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It would be recalled that the U.S. investment bank, JP Morgan, last week threatened to remove Nigeria from its list of Government Bond Index (GBI-EM) by the end of October, after warning the government that currency controls were making transactions too complicated.


But traders said the market has already overcome the effects of that move, and most offshore investors had exited the market prior to the JP Morgan announcement.




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