Nigeria’s Debt Management Office (DMO) plans to raise N300 billion through two local bonds with five- and nine-year maturities. The auction is set for next Monday.
The demand for assets denominated in naira has been rising, and the fixed-income market has been very active lately. Nigeria’s inflation rate recently dropped below the benchmark interest rate, which has increased demand for bonds and other fixed-interest assets.
However, analysts have warned that lower yields on government bonds could lead to capital flight, negatively affecting the economy.
According to a circular obtained by MarketForces Africa, the DMO has replaced the February 2031 bond with the May 2033 bond. At the upcoming auction, the DMO intends to raise N200 billion from the April 2029 bond and N100 billion from the May 2033 bond.
Experts predict that the auction will attract significant interest, with many investors eager to buy naira assets as inflation continues to decline. However, opinions are divided on the potential direction of bond yields, although a downward trend in yields on naira assets has been a common theme in the local debt market.
As the gap between inflation and interest rates grows, banks and pension fund managers are anticipated to be significant participants in the auction. Because they are backed by the Nigerian government’s full faith and credit and are secured by the country’s general assets, Federal Government of Nigeria (FGN) bonds are regarded as safe investments.
