DMO Out with Borrowing Plan for First 3-Month
As part of efforts towards the implementation of the Federal Government of Nigeria (FGN) funding demand to close the budget gap, Debt Management Office (DMO) has announced a borrowing plan for the first three months of 2022.
Through the local debt capital market, Nigeria will be accessing between N420 billion to N480 billion, according to the statement. In its FGN Bonds issuance calendar, Nigeria’s debt office moves to deepen the sovereign curve by introducing a new 20-year FGN bond.
The borrowing plan would be implemented through re-opening of 10-year (₦210-₦240 billion) and the new issue of the 20-year (₦210-₦240 billion) tenors, according to the document.
Furthermore, the DMO has also released its FGN Bonds offer circular for January 2022 primary market auction, indicating plans to offer FGN bonds worth ₦150 billion.
The offer will be made through re-opening of 10-year (₦75 billion) and new 20-year (₦75 billion) tenors. Detail shows that the bond auction is scheduled to hold on January 19, with settlement on January 21.
Some analysts have predicted that new issuance would spur primary market auctions spur rates amidst a slowdown in yields in the fixed income space.
Past records show that robust subscription levels driven by better liquidity in the market and the moderating headline inflation rate has kept return on fixed interest instrument negative for the long term. Read: Treasury Stop Rates to Moderate on Expected Liquidity Boost
Also, the United States Federal Reserve hawkish poise driven by Chair Jerome Powell bond-buying slowdown could force monetary authority in Nigeria to adjust benchmark interest rates upward.
However, analysts have expressed different opinions on interest rate direction in the pre-election year given that Nigeria economy is making a gradual recovery.
But twice an upward interest rate adjustment by Federal Reserve could make frontier and emerging market assets unattractive to foreign investors.
To keep naira on a strong foot, Nigeria requires strong dollar inflows from portfolio investments into the Investors and Exporters FX window.
