The Federal Government secures ₦346.155 billion in its November 2024 bond auction, securing higher allotments despite a decrease in the total amount offered.
The 19.30% FGN APR 2029 (5-Year Bond) and the 18.50% FGN FEB 2031 (7-Year Bond) are up for auction again on November 18 by the Debt Management Office (DMO).
Key Auction Details
In November, the government offers ₦120 billion—₦60 billion for each bond series—representing a 33.33% decrease from the ₦180 billion offered in October. Despite the reduced offering, allotments increase by 19.50%, rising from ₦289.597 billion in October to ₦346.155 billion.
- 5-Year Bond: ₦63.530 billion is allotted, compared to ₦57.237 billion in October.
- 7-Year Bond: ₦282.625 billion is allotted, up from ₦232.360 billion in the previous month.
Strong Investor Participation
Total bids for the auction reach ₦369.585 billion, reflecting a 208% subscription rate. This level of interest slightly declines by 5.06% compared to October’s ₦389.321 billion.
- 5-Year Bond Subscriptions: Increase to ₦75.560 billion, up from ₦60.737 billion in October.
- 7-Year Bond Subscriptions: Decline to ₦294.025 billion from ₦328.584 billion.
Inclusion of Non-Competitive Allotments
The auction incorporates a ₦500 million non-competitive allotment for the 5-Year Bond. This feature allows retail investors and smaller-scale participants to access government securities without competing on marginal rates, fostering broader market participation.
No non-competitive allotment is provided for the 7-Year Bond, indicating a focus on institutional bids for this longer-term instrument, which attracts substantial investor demand.
Marginal Rates and Bidding Trends
Marginal rates rise in November, reflecting tighter liquidity conditions:
- 5-Year Bond: Marginal rate climbs to 21.00% from 20.75% in October.
- 7-Year Bond: Marginal rate increases to 22.00% from 21.74%.
Bid ranges highlight robust competition:
- 5-Year Bond: Bids range from 19.00% to 21.90%.
- 7-Year Bond: Bids span from 18.00% to 23.00%.
Broader Implications
The overwhelming interest in the 7-Year Bond demonstrates investor preference for longer-duration instruments, reflecting expectations of sustained high-interest rates. The sharp contrast between subscription and allotment levels shows the DMO’s calculated approach to balancing funding needs with market stability.
Increased allotments and higher marginal rates indicate that the government can still raise money in spite of changing market conditions. Rising borrowing prices, however, highlight how crucial it is to allocate these funds to vital industries in order to promote sustainable growth.
