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FG Bond Market Raises N3.06 trillion in 2022, Recording 53.2% Oversubscription

FG Bond Market Raises N3.06 trillion in 2022, Recording 53.2% Oversubscription

The federal government, through the Debt Management Office (DMO), raised an enormous amount of N3.06 trillion from the bond market in 2022 as a result of the necessity to finance the budget deficit, according to the results of the debt office’s monthly auction.

According to an analysis of the auction results, the total amount borrowed for FGN bonds in 2022 will be N2.71 trillion, 13% more than in 2021.

The budget for the federal government for 2022 was N17.32t trillion with a N7.35t trillion deficit, which leaves room for N6.1 trillion in fresh borrowing.

According to the results of the monthly auction, DMO had requested N2.48 trillion in the bond market but received N4.65 trillion instead, more than a 53.22 percent oversubscription.

When compared to the N1.13 trillion that the DMO offered, FGN bonds saw a 37 percent oversubscription in the first half of 2022, totaling N3.02 trillion.

Despite conflicting interest rates, the debt office ultimately distributed N1.84 trillion to investors.

However, when the DMO sought to raise N1.35 trillion in the second half of 2022, it distributed N1.23 trillion to investors. In the second half of 2022, there was N1.63 trillion worth of subscriptions.

the 10-year note’s interest rate As part of its efforts to combat inflation, the Central Bank of Nigeria (CBN) raised the Monetary Policy Rate (MPR) in 2022, which resulted in a large increase in the price of FGN Bonds.

Notably, the interest rate on the 12.50% FGN APR 2032, which was 12.45 percent in May 2022, completed the auction in December 2022 at 14.750 percent.

Pension Funds Administrators (PFAs) participated more in the FGN bond market in 2022 as rising inflation reduced stock market investments.

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As of October 2022, the pension funds industry portfolio in the FGN Bonds (HTM) grew to N8.84 trillion, up N489.9 billion or 5.86% from the N8.35 trillion disclosed by the National Pension Commission (NAICOM).

The DMO offered investors products worth N225 billion at the December Primary Market Auction (PMA) through reopenings of the 14.55% APR 2029 bond.

Demand was stronger across all three tenors, and the total subscription level increased to N532.20 billion from the N344.01 billion DMO announced in November as more people expressed interest in the long-term bond.

In the end, the DMO distributed instruments totaling N264.52 billion, or a bid-to-cover ratio of 2.0x.

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