FG to raise N450bn from Jan bond auction

Nigeria’s inaugural domestic dollar-denominated bond has contributed a substantial N1.47 trillion to the nation’s total domestic debt, latest domestic debt report from the Debt Management Office (DMO) has shown.

The bond accounts for 2.12% of Nigeria’s total domestic debt stock, which stood at N69.22 trillion as of September 30, 2024. Its issuance represents a milestone in the Federal Government’s strategy to diversify funding sources and attract foreign investment. Unlike naira-denominated instruments, this dollar bond offers investors a unique opportunity to participate in Nigeria’s economy while mitigating the currency risks associated with naira volatility.

This comes as the federal government, through the Debt Management Office (DMO), has announced plans to raise N450 billion in its January 2025 bond auction. This represents a notable increase from the N360 billion offered in January 2024 and the N120 billion issued in December 2024.

The initiative is a strategic move to address the fiscal deficit, fulfill financial obligations, and provide attractive investment opportunities for both institutional and individual investors. The January auction features a blend of reopened and new bond issuances, thoughtfully designed to appeal to a diverse range of investors.

The auction includes three bond categories, one of which is a five-year bond with a 19.30% coupon rate, initially issued in April 2029. Through the reopening of this bond, the government seeks to raise N100 billion, further reinforcing its commitment to effective debt management and economic stability.

Meanwhile, the domestic debt recorded mixed performance, declining by 5.34% in dollar terms from $48.45 billion in June to $45.87 billion in September. In naira terms, however, domestic debt increased by 3.10%, from N71.22 trillion to N73.43 trillion.

Federal Government bonds remained the largest component of domestic debt, increasing by 4.47% to N54.65 trillion in September, up from N52.32 trillion in June. This represents 78.95% of the total domestic debt stock, an increase from 78.13% in the previous quarter.

The second-largest domestic debt component, Treasury Bills, declined marginally by 0.66% to N11.73 trillion, from N11.81 trillion in the previous quarter. This reduction aligns with efforts to moderate short-term debt and mitigate rollover risks.

Promissory notes, used to settle government obligations, grew by 5.80%, increasing from N1.67 trillion in June to N1.77 trillion in September.

Federal Government Sukuk, an infrastructure funding instrument, declined by 9.14% to N992.56 billion, down from N1.09 trillion.

Savings bonds increased by 16.11% to N64.09 billion, reflecting growing retail investor participation. Green bonds remained unchanged at N15 billion, maintaining their minimal contribution of 0.02% to the domestic debt stock.