Nigeria secures N289.59bln from October bond auction amid inflationary pressures

The Federal Government says it has successfully raised N289.597 billion from its October 2024 bond auction, exceeding initial expectations.

Two reopened tranches of existing bonds, the 19.30 percent FGN APR 2029 (5-year bond) and the 18.50 percent FGN FEB 2031 (7-year bond), were part of the auction on October 21.

Despite inflationary pressures, the auction attracted robust investor interest, resulting in a higher allotment.

The government initially offered N180 billion, with N90 billion allocated to each bond. This was slightly lower than the N190 billion offered in September.

However, the total allotment for October surged to N289.597 billion, highlighting heightened investor demand for government securities.

The 5-year bond attracted N$60.737 billion in subscriptions, while the 7-year bond saw a significant jump in bids, totalling N$328.584 billion.

Investor engagement increased sharply, rising to N389.321 billion in October from N293.097 billion in September.

This reflects investors’ sustained appetite for longer-dated instruments, offering better returns in a rising interest rate environment.

The 5-year bond allocated N57.237 billion out of the total bids received, while the 7-year bond allocated N232.360 billion.

The total allotment represents a 9.5 percent increase from the N264.527 billion raised in September.

The larger-than-offered allotment suggests the government took advantage of strong demand to meet financing needs at prevailing rates.

Marginal rates increased notably, reflecting investors’ expectations for higher yields amid inflation concerns and tighter monetary policies.

The 5-year bond’s allotment increased by 9.2 percent to 20.75% from 19.00 percent in September.

The 7-year bond saw its marginal rate rise to 21.74 percent from 19.99 percent, an 8.8 percent increase.

This development highlights the complex environment in which the government is raising capital.

While the higher allotment reflects the government’s ability to secure financing, the increase in marginal rates indicates escalating borrowing costs.

As inflationary pressures persist, the government must balance financing needs with market expectations.