Leadership (Abuja)

Nigeria: Foreign Investors' Demand Rise on FGN Bonds

Demand for government papers rose at the August bond auction of the Debt Management Office, as more foreign investors participated.

The DMO said there was a total subscription of N249.11 billion for the N75 billion bond that was issued, compared to a total subscription of N121.6 billion at the June auction.

This is coming at the heels of the inclusion of the Federal Government bonds on the JP Morgan Government Bonds Index-Emerging Markets (GBI-EM). JP Morgan's economist and strategist for Sub-Saharan Africa, Giulia Pellegrini, had said three of the country's bonds, maturing in 2014, 2019 and 2022 would be included in the GBI-EM because of their liquidity.

The debt office had at the auction on Wednesday sold N25 billion each of the 2017, 2019 and 2022 FGN bonds, all of which were reopening. However, the DMO noted that the original coupon rates of 15.10 per cent, 16 per cent and 16.39 per cent for the April 2017, June 2019 and January 2022 respectively will be maintained.

The 5-year bond was issued at a yield of 16.32 per cent, higher than the 16.19 per cent at the last auction. It issued the 7-year note at 16.14 per cent, lower than the 16.59 per cent previously, while the 10-year paper was issued at a yield of 15.90 per cent, compared with 16.30 per cent at the last auction.

The inclusion in the JP Morgan GBI-EM is expected to pull in over $1 billion into the Nigerian bond market and further deepen the market. Also higher yields on the government bonds is expected to attract more offshore investors into the Nigerian bond market.

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