DMO records N139 billion oversubscription of Bonds (January, 2022)
Nigeria’s Debt Management Office (DMO) has recorded a-N139 billion oversubscription of the Federal Government bond issuance for the month of January 2022, thus raising it to N214.1 billion despite only seeking N75 billion in its 20-year bond issuance.
This is contained in the January 2022 FGN bond auction result, released by the DMO.
The Debt Management Office issued two tranches of bonds in its first issuance for the year, reopening its 12.5 FGN 10-year bond and issuing a new 13% FGN 20-year bond, which is set to mature by 2042.
The breakdown of the report reveals that the first tranche was oversubscribed by N36.19 billion with subscriptions of N111.19 billion surpassing the offered amount of N75 billion, while the second tranche was oversubscribed by N139 billion over the N75 billion offered amount.
It would be recalled that the DMO bond issuance calendar for Q1 2022 last week, put the first auction date on 19th January 2022, with the rest coming up on 16th February and 23rd March 2022 respectively.
According to the report on the January auction performance, successful bids for the 12.50% FGN JAN 2026 & 13.00% FGN JAN 2042 were allotted at the Marginal Rates of 11.50% 11.00% – 14.50% 13.0000% and 13.00%, respectively.
However, the original coupon rates of 12.5000% for the 12.5000% FGN JAN 2026 will be maintained, while the coupon rate for the 13.00% FGN JAN 2042 (New Issue) is set at 13.00%.
The oversubscription of the FGN bond issuance implies that Nigerian investors are very much still putting their money into less risky instruments despite low returns, with other investment channels not printing attractive returns lately. However, the interest had improved compared to the single-digit interest rates recorded in the previous year.
FGN Bonds are debt securities (liabilities) of the Federal Government of Nigeria (FGN) issued by the Debt Management Office (DMO) for and on behalf of the Federal Government. The FGN has an obligation to pay the bondholder the principal and agreed interest as and when due.
When you buy FGN Bonds, you are lending to the FGN for a specified period. The FGN Bonds are considered as the safest of all investments in domestic debt market because it is backed by the ‘full faith and credit’ of the Federal Government, and as such it is classified as a risk-free debt instrument.
According to the DMO, the bonds have no default risk, meaning that it is certain your interest and principal will be paid as and when due. The interest income earned from the securities are tax exempt.