- Wednesday auction is a pointer that FG will be aggressive in the primary market
Following the second quarter bond auction calendar which has obviously shown that Nigeria’s federal government will persist in its aggressive trading in the primary market, the Debt Management Office (DMO) announced the auctioning of three FGN bonds of N150 billion to be sold at N1000 per unit. The debt office revealed at the auctioning on Wednesday that three bonds were valued at N50 billion per one and with 16.29 per cent; 12.50 per cent and 9.80 per cent respectively.
It said the listing date has been scheduled for 21 April while the data of settlement is two days later, April 23 while the minimum units up for sale are N50,001 thousand and in multiples of N1,000 thereafter.
According to the details obtained from the DMO website on Wednesday, it explained that the bond qualifies as government security within the implication of Company Income Tax Act and Personal Income Tax Act for tax exemption for pension funds and other investors’ related securities and also qualifies as securities for trustees to invest in under the Trustee Investment Act. It further noted that the federal government bonds are eligible to be used as liquid assets for the calculation of liquidity ratio for banks as they are backed by the full faith and credit of the federal government and charged upon the general assets of Nigeria.
However, the debt office revealed that they are listed on the Nigerian Stock Exchange and FMDQ over the counter (OTC) Securities Exchange, respectively while explaining that the rates of interests would be paid twice in a year with the bullet repayment on the maturity date.
“For re-openings of previously issued bonds, successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned plus any accrued interest rate on the instrument,” said the DMO said while urging investors who are interested to contact the designated banks.
Worthy of note is the fact that the debt office plans to canvass between N450 billion and N480 billion in the bond market which is evenly divided across the March-2027, March-2035 and July-2045 reopening. The issuance being targeted is much lower than N635 billion raised during the first quarter out of which N465 billion was from an auction while the N170 billion came from the non-competitive allotment. Nevertheless, analysts have opined that the liquidity conditions will be relatively tight in the second quarter in the midst of scanty OMO maturities unlike in the first quarter, which signifies that the DMO’s aggressive posture may have further price impact.