Nigerian govt. debut 30-year bond oversubscribed by over 400%- DMO

Director-General, Debt Management Office, DMO, Patience Oniha
Director-General, Debt Management Office, DMO, Patience Oniha

The Debt Management Office (DMO) on Wednesday announced a 400 per cent oversubscription of the maiden edition of its 30-year Federal Government bond.

The debt management agency said investors in the N20 billion 30-year FGN Bond participated in the April 2019 FGN Bond Auction.

“For the first time, the DMO introduced the 30-year FGN Bond into the market at the April 2019 FGN Bond Auction held on Wednesday April 24, 2019.

“A total subscription of N80.41 billion was received from investors for the N20 billion offered by the DMO for the 30-year Bond, representing over 400 per cent subscription rate,” the DMO said in a press statement.

The agency said the bulk of the subscriptions came from asset managers and insurance companies that have been looking for long-term, good quality assets to buy in order to match their liabilities.

According to the DMO, with the success of the 30-year Bond offering, it has reinforced its pioneering role in the domestic capital market by introducing another longer-dated instrument.

‘Effective Tool’

The Director General of the DMO, Patience Oniha, said the new longer-dated instrument for the government represents appropriate funding for infrastructure and an effective tool for spreading out its liabilities.

Besides, she said the instrument, for the private sector, will provide an avenue for other issuers, such as corporates, to access longer-term funding for their projects.

The DMO offered a total of N100 billion in tenors of five, ten and 30 years maturity period at the auction and received total subscriptions of N149.30 billion, representing a total subscription level of about 150 per cent.

The DMO allotted a total of N97.40 billion to successful bidders at 14.50 per cent for the five-year, 14.55 per cent for the 10-year and 14.80 per cent for the 30-year FGN Bond.

The DMO said the N20 billion 30-year paper would mature in April 2049; the 10-year issue of N40 billion to mature in April 2029 and a five-year re-opening of N40 billion to mature in April 2023.

On April 4, the DMO DG announced plans by the Federal Government to issue the 30-year paper.

She said the bonds were considered, given the relatively low-interest rates compared to 2017 levels of more than 18 per cent.

“The issuance of the bond will meet the needs of annuity funds and other long term investors while also developing the domestic capital market and reducing the re-financing risk of the federal government.

“She said another area of focus by the government will be the management of risks associated with the debt stock to mitigate debt service costs.”

The 30-year bond issue would enable the government to raise long-term capital for infrastructure development and serve as a benchmark for private sector raising of long-term investment capital.

Also, it would reduce short-term debt and deepen the Life Insurance sector in particular.

According to DMO, units of sale of the bond was N1,000 per unit, subject to a minimum subscription of N50 million and in multiples of N1,000 thereafter.

The bonds are backed “by the full faith and credit of the Nigerian Government, with interest payable semi-annually to bondholders, while bullet repayment will be made on maturity date.”

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