May auction results show short term bonds no longer attractive

Figures provided by the Debt Management Office (DMO) show that the five- year and seven-year tenor bonds offered by the federal government in May did not record up to 50 percent allotment.

According to the auction results released on Thursday, only the 10-year tenor bond was oversubscribed.

A total of N50.45 billion was realised from the auction, lower than the N70 billion target.

Of the N20 billion offered, N3.50 billion was allotted from the five-year bond at 12.75 percent.

The DMO also made N8.54 billion from the seven-year bond at 13.53 percent and N38.50 billion from its 10-year bond at 13.98 percent.

“In addition, N14.99 billion of the 13.53% FGN MAR 2025 and N14.99 billion of the 13.98% FGN FEB 2028 were allotted on a non-competitive basis,” the auction results read.

Of the total 101 bids, the debt agency said 62 were successful, adding that the auction drew subscriptions of N89.82 billion.

Nigeria issues sovereign bonds monthly to support the local bond market, create a benchmark for corporate issuance and fund its budget deficit.

It also uses a number of other debt instruments to fund capital projects.

In March, the DMO announced that it realised N64 billion from the bond auctions and that the proceeds will be used to fund the 2018 budget.