BY BAMIDELE FAMOOFO
The Federal Government through the Debt Management Office has declared plans to raise a sum of N150billion from the Bond market in March.
The auction date for the deal is March 21 while settlement extends by two days. Investors who are willing to subscribe for the first tranche of a 10- year reopening bond are expected to get a 12.5 percent return on investment interest while those bidding for the 20-year re-opening debt instrument will attract 13.0 percent interest. Interest is payable semi-annually
“For Re-openings of previously issued bonds, (where the coupon is already set), successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus any accrued interest on the instrument,” DMO disclosed.
According to the DMO, investors are expected to bid at N1, 000 per unit subject to a minimum subscription of N50, 001,000 and in multiples of N1, 000 thereafter.
Primary Dealer Market Makers to the Offer are 13 banks which include among others, Access Bank Plc; First Bank of Nigeria Ltd; Standard Chartered Bank Nigeria Ltd; Citibank Nigeria Ltd; First City Monument Bank Plc; United Bank for Africa Plc; Coronation Merchant Bank Ltd; and FSDH Merchant Bank Ltd. Others are Zenith Bank Plc; Ecobank Nigeria Ltd; Guaranty Trust Bank Plc; FBNQuest Merchant Bank Ltd and Stanbic IBTC Bank Plc.
Nigeria’s total public debt as at December 31, 2020 was about N32.92 trillion. The figures include the Debt Stock of the Federal and State Governments, as well as, the Federal Capital Territory.
The DMO has argued that the level of borrowing by the largest economy in Africa has declined since 2017 but the success was reversed with the advent of the Covid-19.
“It will be recalled that after Nigeria exited recession in 2017, the level of new borrowing at the Federal Level as shown in the Annual Appropriation Acts, had been declining as part of the Government’s measures to moderate the rate of Growth in the Public Debt Stock in order to ensure debt sustainability. New Borrowing to part finance Budget Deficits had declined steadily from N2.36 trillion in 2017 to: N2.01 trillion in 2018, N1.61 trillion in 2019 and N1.59 trillion in the first 2020 Appropriation Act. This trend was reversed in 2020 due to the economic and social impact of the COVID-19 Pandemic as New Borrowing in the revised 2020 Appropriation Act was N4.20 trillion. Many countries including the advanced countries also increased their level of borrowing as a result of COVID-19.”
The DMO further stated: “It should be noted though, that apart from the new domestic borrowing of N2.3 trillion, the other new borrowings were concessional loans from the International Monetary Fund (USD3.34 Billion) and other multilateral and bilateral lenders. This incremental borrowing to part-finance the 2020 Budget and the additional issuance of Promissory Notes to settle some arrears of the Federal Government of Nigeria, contributed to the increase in Public Debt Stock. New domestic borrowings by State Governments also contributed to the growth in the Public Debt Stock.”
Total public debt to gross domestic product as at December 31, 2020 was 21.61 percent which is within Nigeria’s new Limit of 40 percent. “The various initiatives of the government to increase revenues such as the Strategic Revenue Growth Initiative and the Finance Act, 2020, should help shore up Government’s revenue and reduce the Debt Service to Revenue Ratio,” DMO
noted.
