The Nigeria’s FGN Debt Management Office re-opened the 10 years and 20 years bond issuance in March 2022 which has recorded an oversubscription of N448.42 billion as suppose to the N150 billion offered by the DMO.
This information was disclosed in the March 2022 FGN Bond auction result released by the Debt Management Office on the 21st March 2022.
This is coming three days after the Nigerian Finance Minister, Zainab Ahmed priced a $1.25billion Eurobond issue at 8.375%. A premium compared to the existing periods as the country sought to raise cash to fund the rising costly petrol subsidy scheme in the face of the limited oil revenue.
This Eurobond issue marked Nigeria’s eight outing on the Eurobond market after it sold about $4billion debt in Septemeber 2021 and had since considered more issues before the fears of the negativities surrounded by the Omicron variant of the COVID-19 pandemic shelved the plans.
However, the choice of the Federal Government to go ahead with the issue in the current adverse market conditions is largely linked to the force majeure reducing the oil revenue while subsidies are retained though surging in tandem to the global crude oil price.
The FGN bond issuance on Monday was auctioned in two tranches, the first of which a N12.5% FGN Jan 2026 bond programme sought to raise N75billion, gathering a total subscription of N231.02 billion across 97 bids, with a marginal rate of 10.1500%.
While, the second bond programme consisting of 13% Jan 2042 bond raised a total subscription of N367.40billion across 141 bids, representing a N157.32 billion oversubscription on the offered amount of N75billion with a marginal rate of 12.700%.
However, for the bond issue in March, the marginal rate for the bond issue declined to 10.15% as compared to the 10.95% of 12.5% FGN Feb 2026 issued last month.
- The bonds were auctioned on the 21st March 2022, with the settlement date set at March 23, 2022.
- The tenors for the two bonds are 10-year and 20-year with maturity dates of January 22, 2026 and January 21, 2042 respectively.
- The 10-year bond recorded 97 successful bods out of the total 170 bids, while the 20-year bond recorded 141 successful bond out of 227 total bonds.
- According to the March auction performance report, successful bids for the 12.50% FGN JAN 2026 and the 13.00% FGN JAN 2042 were allotted at the marginal rates of 10.1500% and 12.7000% respectively.
- Meanwhile, the original coupon rates 12.5000% for the 12.5000%FGN JAN 2026 and the 13.0000% for the 13.0000% FGN JAN 2042 would be maintained.
Why the oversubscription
Despite the decline in the interest rate, the bond issue remained oversubscribed, indicating that the Nigerian investors prefer less volatile securities that guarantee their capital returns, though with low yields on investment to the risky assets such as stocks and cryptocurrencies, which appear to be very volatile.
The FGN bond is therefore a safe asset for the investors that has the backing of the FGN.