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Nigerians oversubscribe to January 2020 FG bond auction by more than 300%

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NIGERIANS have oversubscribed the Federal Government January 2020 bond auction by more than 300 percent amounting to N626.33 billion.

A statement by Debt Management Office (DMO) said the auction was conducted on Wednesday during which it offered N155 billion on behalf of the federal government of three instruments (5-Year, 10-Year and 30-Year Tenors) to investors.

The DMO said subscriptions received through Competitive Bids for the three instruments at the auction was N624.498 billion, while the sum of N1.83 billion was received through Non-Competitive bid making the total subscription received the sum of N626.328 billion.

It stated that investor appetite for the 30-Year Bond is continuously strengthened over the years, with subscription of N341.77 billion or 621 percent compared to the amount offered of N55.00 billion, while subscription for the 10-year Bond was N201.98 billion or 404 percent when compared with the amount offered of N50.00 billion.

According to the report, successful bids were allotted at the rate of 9.8500 percent for the 5-Year, 11.1250 percent for the 10-Year and 12.5600 percent for the 30-Year bonds which indicate a significant decline from the rates of 11.0000 percent, 12.0000 percent and 13.0000 percent for the 5-Year, 10-Year and 30-Year Bonds, respectively, at the December 2019 Federal Government Bond auction.

“The total amount allotted for Competitive Bids was N409.992 billion across the three (3) tenors. In addition, the sum of N1.83 billion was allotted through Non-Competitive Bid for the 30-year Bond at same rate with the Competitive Bids,” it said.

Overall, the sum of N411.822 billion was allotted to investors at the Auction through both Competitive and Non-Competitive Bids.

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The Federal Government 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.

Seyi Kolawole, a research analyst at NASD Plc who spoke to The ICIR on the bond said investors would rather put money into FGN bond auction over state or corporate bonds regardless of the decline in percentage offered.

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