DMO raises N864.9 billion bond in Q3

The Debt Management Office (DMO) of Nigeria raised a total of N864.9 billion from its monthly bond auctions in the third quarter (Q3), covering re-openings and new.

This figure was a reduction from the N1.3 trillion raised in Q2 2024, reflecting decreased bond issuance during the quarter.

However, the initial offer for Q3 2024 stood at N640 billion, significantly lower than Q2’s N1.35 trillion, indicating a more conservative approach to bond issuance in the third quarter.

Despite this drop in issuance, demand remained relatively subdued, with total subscription levels reaching N1.15 trillion compared to N1.78 trillion in Q2, resulting in an average bid-to-cover ratio of 1.31x, slightly below the previous quarter’s 1.35x.

At the Cowry Asset Management Q3 Webinar on Nigeria’s Economic Landscape at the weekend, the Chief Executive Officer, Johnson Chukwu, said the hike in interest rates and yields in Q3, heightened investors’ interest in Nigeria’s fixed-income market, contributing to increased demand and subsequently lowering yields on Federal Government of Nigeria (FGN) bonds by the end of the quarter.

According to him, the average yield on FGN bonds peaked at 20.1 per cent in mid-August in the secondary market, following earlier monetary policy tightening measures.

However, he noted that the rising demand in the fixed-income market brought the average yield down to 18.5 per cent by the close of September.

This marked a slight decline of 0.11 per cent from the 18.6 per cent recorded at the end of the second quarter.

He said the shift was largely driven by elevated yields making the fixed-income market more attractive, particularly amid the rising interest rates, which diverted capital away from equities and other higher-risk investments into more secure government bonds.

Chukwu disclosed that the DMO has successfully raised N4.97 trillion through FGN bonds Year-To-date out of a planned issuance of N5.3 trillion for the first nine months.

“Demand has been relatively strong overall, with total subscriptions amounting to N6.05 trillion,” he said.

He also noted that for the Nigerian economy to record meaningful growth, there was a need for the government to tackle security challenges in the Northern region as well as boost crude oil production.

The economist said relying on insecurity in the North would boost food production and minimise the issue of food inflation which stood at 37.52 per cent as of August 2024.

According to him, several farmers have abandoned their farmlands, which has reduced the nation’s food supply and resulted in food inflation.

Chukwu pointed out that despite the government’s massive investment in agriculture, the sector contributed less than two per cent to GDP, noting that a thriving and vibrant agricultural sector is essential for the nation’s economic growth.

He also stressed the need for Nigeria to prioritise increasing crude production and increased crude oil production to boost foreign exchange earnings.

He said Nigeria fell short of crude production which is currently impacting negatively on the nation’s economic growth.

“Nigeria must produce additional crude to have more to export and stabilise the exchange rate. This would help strengthen foreign reserves, stabilise the cost of fuel and tame inflation,” he said.