Nigeria’s debut domestic dollar-denominated bond has contributed an additional N1.47 trillion to the country’s total domestic debt, according to the latest report from the Debt Management Office (DMO).
The report highlights that this bond accounts for 2.12% of Nigeria’s total domestic debt stock, which reached N69.22 trillion as of September 30, 2024. The issuance represents a strategic move by the Federal Government to diversify funding sources and attract foreign investment. Unlike naira-based instruments, this bond provides investors an opportunity to engage with Nigeria’s economy while mitigating the risks associated with currency fluctuations.
Breakdown of Domestic Debt Components
The report revealed a mixed performance in Nigeria’s domestic debt portfolio. While domestic debt decreased by 5.34% in dollar terms, falling from $48.45 billion in June to $45.87 billion in September, it saw a 3.10% increase in naira terms, rising from N71.22 trillion to N73.43 trillion within the same period.
Key components of the domestic debt include:
- FGN Bonds: Federal Government bonds, which remain the largest portion of domestic debt, increased by 4.47% to N54.65 trillion in September, up from N52.32 trillion in June. These bonds now constitute 78.95% of the total domestic debt stock, reflecting a growth from 78.13% in the previous quarter.
- Nigerian Treasury Bills: The second-largest component, Treasury Bills, saw a marginal decline of 0.66%, dropping to N11.73 trillion from N11.81 trillion. This reduction aligns with the government’s strategy to manage short-term debt and minimize rollover risks.
- Promissory Notes: Government-issued promissory notes increased by 5.80%, rising from N1.67 trillion in June to N1.77 trillion in September.
- FGN Sukuk: Infrastructure-focused Sukuk bonds fell by 9.14%, decreasing to N992.56 billion from N1.09 trillion.
- FGN Savings Bonds: Savings bonds experienced significant growth, increasing by 16.11% to N64.09 billion, signaling increased participation by retail investors.
- Green Bonds: The contribution of green bonds remained unchanged at N15 billion, making up a minimal 0.02% of the domestic debt stock.
Significance of the Dollar Bond Issuance
Nigeria’s successful launch of its first domestic dollar-denominated bond attracted over $900 million in subscriptions, exceeding the initial $500 million offering. The bond, issued at par with a 9.75% annual coupon, achieved a subscription rate of 180%, highlighting strong investor confidence in Nigeria’s economic prospects.
The Africa Finance Corporation (AFC) played a key role in coordinating the issuance, attracting a diverse pool of investors, including Nigerians at home and abroad, as well as institutional investors.
The Ministry of Finance has described the bond issuance as a groundbreaking achievement, positioning Nigeria as a leader in financial innovation within Africa. According to Finance Minister Wale Edun, the proceeds from the bond will be used to fund essential infrastructure projects and economic development initiatives, further driving Nigeria’s economic growth agenda.
This milestone marks a significant step in enhancing Nigeria’s capital markets and strengthening the country’s financial stability amid ongoing economic challenges.
