FG raises N475.67 billion in March bond auction over rising rates rally

The Federal Government has raised N475.67 billion in its March bond auction, capitalising on the current rally in rising rates.  

The auction, conducted on March 18, 2024, by the Debt Management Office (DMO), attracted an overwhelming interest from investors, demonstrating their confidence in the nation’s economic stability and growth potential. 

The amount raised in March is slightly higher than what was raised in January (about N418.197 billion) and far less than what was raised in February (N1.49 trillion). However, there has been a consistent increase in the rates offered from an average of about 15% in January to about 20% in March. 

Rising investor interest amidst rising rates 

The auction featured three offerings: a new 3-year bond, alongside the reopening of 7-year and 10-year bonds, all of which witnessed remarkable demand, especially the 19.94% FGN MAR 2027 3-Year Bond and the 19.00% FGN FEB 2034 10-Year Bond. 

  • The 3-year bond alone, offered at N150 billion, drew bids amounting to N264.628 billion, leading to an allotment of N151.928 billion at a marginal rate of 19.94%. This signifies an impressive subscription rate, nearly 76% above the offered amount, underscoring the investors’ bullish stance on Nigeria’s debt instruments. 
  • Moreover, the 10-year bond, with the same offer amount of N150 billion, attracted bids worth N298.600 billion, culminating in an allotment of N275.850 billion at a marginal rate of 20.45%. The nearly doubled subscription volume highlights a strong belief in the country’s long-term economic prospects and stability. 

A closer look at the 7-year bond performance 

  • While the 7-year bond reopening was not as overwhelmingly subscribed as its counterparts, it still showed healthy demand. With bids totalling N51.786 billion against an offer of ₦150 billion, the DMO allocated N47.886 billion at a 20.00% marginal rate. 
  • This more measured response points to a strategic preference among investors, balancing short-term gains and long-term security amidst fluctuating market conditions. 

Implications for Nigeria’s economic landscape 

  • The auction results offer several key takeaways for Nigeria’s economic landscape. This significant influx of funds through the bond auction is a strategic win for the Federal Government, providing essential capital to fuel its developmental and infrastructural initiatives. It reflects the investors’ strong appetite for higher-yield investments and confidence in Nigeria’s economic management and policy direction. Also, the willingness to lock in higher rates for longer terms suggests an anticipation of inflation control and a stable interest rate environment in the foreseeable future. 
  • The successful bond auction also highlights a broader trend of rising rates, with investors actively seeking opportunities promising higher returns in a stable economic environment.

by Sami Tunji

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