Posts
bond) remained strong, with a bid-to-cover ratio of 2.71 times.
Allotments were made at 13.85 per cent for the 14.55 per cent April 2029 instrument and 15.00 per cent for the 14.70 per cent June 2033 instrument.
Also, “15.20 per cent was for the 15.45 per cent June 2038 instrument and 15.85 per cent for the 15.70 per cent June 2053 instrument,” the DMO said.
The federal government had proposed to borrow over N11 trillion to finance the proposed 2023 budget deficit.
Findings revealed that FGN Bonds auctioned were re-openings with rates below the inflation rate.
The debt office in 2023 maintained four tenor bond auctions between January and June and each FGN bonds offers were oversubscribed.
Meanwhile, finance experts have attributed the strong demand for FGN bonds to attractive yields, which offer investors high returns on their investments.
They added that the oversubscription also revealed that investors have confidence in the government’s ability to meet its debt obligations.
The appetite for FGN bonds indicates that PFAs, and Nigerian investors prefer investment instruments with less volatility that assures them of their capital returns albeit with low yield on investment.
But, in recent years, Nigeria’s rising debt profile has been a topic of concern, as Vice President, Highcap Securities Limited, Mr. David Adnori warned that the country’s debt levels are unsustainable.
DMO stated in January that Nigeria’s public debt could rise to N77 trillion if the country’s “ways and means” are securitized.
“Ways and means” refer to the CBN’s lending to the federal government. The DMO said that the securitization of ways and means” is not unusual and is a common practice in many countries, but it is not a decision that can be made by the DMO alone.
Adnori expressed concerns that Nigeria’s rising debt levels could become unsustainable if not managed properly.
The government has argued that borrowing is necessary to finance critical infrastructure projects and stimulate economic growth.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, who is also an economist said the FG had notified the general public of borrowing more in 2023.
According to him, “With all the volatility and foreign exchange issues, it makes sense to borrow at the domestic market rather than borrowing from the international market. It is all a reflection of our macro economy environment challenges and weak fiscal policy of the government. All this borrowing also is a reflection of the weak financial position of the government and it will continue like that.”
He noted that the oversubscription to FGN bond is a lucrative investment, stressing that the low risk involved attracted investors.
He added, “Anything sovereign has the lowest risk and nothing will go wrong with it except the country is collapsing completely. All over the world, sovereign bonds have the lowest risk and secondly it is an investment outlet for investors to invest their money.”
On his part, the Chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion, said, “We know that previous government borrowing was high. Excessive borrowing by the previous government at the expense of the private sector, which is the engine room of the economy brings to question the soundness of their economic strategy.
“The careless use of debt as a financing tool is fraught with calamitous dangers. Even more disheartening is when the debts are principally used to finance consumption or to unwisely finance few secondary infrastructures (Roads and Rail).
“These will neither enhance the productive momentum of Nigeria’s light industries nor make the economy self-reliant. The disorderly growth of the economy the last administration pursued can only mislead the country into an abyss if public borrowing is not curtailed to lower cost of funds so that production will be competitive.”
No comments