Nigeria’s government secured ₦606 billion in its most recent bonds auction by offering higher yields to attract investors, aiming to bridge the funding gap for its 2025 budget. The auction saw robust demand, with total subscriptions reaching ₦669.34 billion, 49% above the ₦450 billion initially offered.
Bonds with maturities of April 2029, February 2031, and a new bond issued in January 2035 were issued by the Debt Management Office (DMO).
Here’s a breakdown:
- The April 2029 bond saw a slight undersubscription, while the February 2031 bond was oversubscribed by 17%.
- The new January 2035 bond accounted for 61% of the total allotment.
Higher Rates: Stop rates for all maturities increased compared to the previous auction:
- April 2029: 21.79% (up from 21.14%)
- February 2031: 22.50% (up from 22.00%)
- January 2035: 22.60%
This rise in rates reflects Nigeria’s ongoing struggle with inflation, which hit 34.80% in December. The Central Bank of Nigeria (CBN) has raised its benchmark interest rate to 27.50% to combat inflation. Analysts expect further monetary tightening in 2025 as inflationary pressures persist.
Investor Response: The strong demand for bonds suggests confidence among local investors. TrustBanc Financial Group noted an improved bid-to-cover ratio of 1.49x, up from 0.78x in the previous auction. However, AIICO Capital predicts mixed or bearish market activity in the near term due to the higher yields.
These events demonstrate how Nigeria must strike a balance between regulating the effects of inflation on the economy and raising money for its budget.
