Nigeria issued 120 billion naira ($600 million) worth of naira-denominated bonds maturing in 2020 and 2024 at a recent auction at lower yields than the returns at its previous auction, the Debt Management Office (DMO) stated. The returns on the paper reflected the prevailing low yields on local bonds at the secondary market.
The debt office raised 40 billion naira in the 2020 debt at 13.11% compared with 15.95% at the previous auction in August. The same tenor bond closed at 13.28% at the secondary market.
A total of 80 billion of the benchmark bond maturing in 2024 was issued at 13.87% compared with 16.84% the same tenor debt attracted at the March auction when it was last issued. The 2024 paper closed at 13.71% at the secondary market.
Yields on Nigerian debt have dropped sharply since September due to increased naira liquidity in the banking system, spurring demand for the local bond by pension and commercial lenders.
The DMO was established on 4th October, 2000 to centrally coordinate the management of Nigeria’s debt, which was hitherto being done by a myriad of establishments in an uncoordinated fashion and have amongst its responsibilities to:
a) Provide good debt management practices that make positive impact on economic growth and national development, particularly in reducing debt stock and cost of public debt servicing in a manner that saves resources for investment in poverty reduction programs;
b) Prudently raise finance to fund government deficits at affordable costs and manageable risks in the medium- and long-term;
c) Achieving positive impact on overall macroeconomic management, including monetary and fiscal policies;
d) Consciously avoiding debt crisis and achieving an orderly growth and development of the national economy;
e) Improving the nation’s borrowing capacity and its ability to manage debt efficiently in promoting economic growth and national development.