The Nigerian government recently concluded a bond auction on May 13, 2024, raising N380.769 billion. However, this amount marks a 39% decrease compared to the previous month's auction. The total subscription across all tenors amounted to N551.316 billion, significantly lower than the previous month's N920.088 billion.
Despite the subdued market activity, the Debt Management Office (DMO) noted a non-competitive allotment of N301.300 billion, indicating ongoing interest from certain institutional investors. This underscores a continued reliance on guaranteed buyers, which helps offset the impact of reduced competitive bidding.
The auction comprised three bonds with different maturities, signaling an intent to secure long-term funding at competitive yields. The new 9-year bond, the 19.89% FGN MAY 2033, attracted N373.875 billion in subscriptions, with N285.124 billion allotted. The 7-year bond, 18.50% FGN FEB 2031, received N76.875 billion in bids, of which N62.975 billion was allotted. Finally, the 5-year 19.30% FGN APR 2029 bond garnered N100.566 billion in bids, with N32.670 billion allotted.
Investor participation in May 2024 marked the lowest level for the year, likely influenced by anticipation ahead of key monetary policy decisions, notably the upcoming Monetary Policy Committee (MPC) meeting scheduled for May 20-21, 2024. Investors seem cautious, awaiting the central bank's decisions on interest rates, which could significantly impact bond yields.
The outcomes of the MPC meeting will be crucial in shaping investor confidence and the government's future borrowing strategy as the DMO continues to offer more bonds in subsequent months. Fitch Ratings recently projected a further hike in monetary policy rates by the Central Bank of Nigeria (CBN) in the second half of the year, attributing Nigeria's improved sovereign credit default outlook to recent reforms in monetary policy and the oil and gas sector. CBN Governor Yemi Cardoso emphasized that interest rates would remain high as needed to combat inflation during a recent interview with the Financial Times.
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