BusinessDay... the voice of business: DMO offers N150bn worth of bonds in 3 months

DMO offers N150bn worth of bonds in 3 months
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BLESSING ANARO on 29 April, 2008 02:00:00
 
The Debt Management Office (DMO) has offered Federal Government of Nigeria (FGN)
Bonds valued at N150 billion in the first three months of this year; 36.36
percent higher than the corresponding period of last year.
A bond is a debt security, similar to an I.O.U. When you purchase a bond, you
are lending money to a government, municipality, corporation, federal agency,
among others.
This means that investors’ confidence in Nigeria’s debt is growing by the
day.
The total subscription was N243.15 billion, down marginally by 11.16 percent
from N273.70billion subscribed in the first quarter, 2007.
The subscription level in 2007 at 162.10 percent was 52.10 percent higher than
the subscription level of 110 percent recorded in the corresponding period of
2007. The total amount of bonds sold and allotted during the period in 2008 at
N150 billion, increased by 36.36 percent over the N110 billion sold in the
corresponding period of 2007.
The DMO offered only 3-year and 5-year FGN Bonds in Q1, 2008, as against
3-year, 5-year and 7-year FGN bonds offered in Q1, 2007.
The 3-year FGN tenured Bonds received huge subscription levels from both local
and foreign individuals and institutional investors, with an average
subscription level of 148.26 percent during the period.
Comparing tenor for tenor, the 3-year bonds issued in Q1, 2008 received lower
coupon rate than the bonds issued in Q1, 2007. The highest coupon rate on 3-year
FGN Bonds issued in Q1, 2008 was 9.60 percent.
This rate was lower than the coupon rate of 10.75 percent on 3-year FGN Bond
issued in Q1, 2007. While the lowest coupon rate on 3-year FGN Bonds issued in
Q1, 2008 was 9.00 percent. A total of N90 billion worth of 3-year FGN Bond was
sold in Q1, 2008 up by 125 percent, as against N40 billion sold in the
corresponding quarter of 2007.
The highest coupon rate on 5-year FGN Bond issued in Q1, 2008 was 10.30
percent. This rate was higher than the coupon rate of 9.50 percent on the only
5-year FGN bond issued in the first quarter of 2007.
The lowest coupon rate on 5-year FGN bonds issued in Q1, 2008 was 9.50 percent,
the same as coupon rate on the same instrument issued in the first quarter of
2007.
A total of N60 billion 5-year FGN Bond was sold in the first quarter of 2008 up
by 71.4 percent as against N35 billion sold in corresponding quarter of 2007.
The lower subscription level on the Bonds issued during the period in 2008
compared with the bonds issued in 2007 can be attributed to the lower coupon
rates recorded during the period in 2008.
FSDH Research had earlier reported in “FSDH Economic and Financial Market
Review for 2007 and Outlook for 2008” that coupon rate on 3-year FGN bonds
will be in the corridor of 9.00 percent - 9.75 percent and the 5-year bonds in
the corridor of 9.50 percent - 10.50 percent.