DMO Issues More Bonds Than Planned as Inflation Falls

The Debt Management Office (DMO) on Thursday said it had issued more bonds than originally planned at an auction after slowing inflation rate helped it offer debt at lower yields.

The DMO said it raised N160 billion at an auction on Wednesday, N30 billion more than it had offered to sell. Nigeria’s inflation slowed to 17.78 percent in February, its lowest level in 15 months.

According to Reuters, the government has been selling bonds below inflation in recent months to curb borrowing costs as it intends to fund half of this year’s forecast budget deficit of N2.36 trillion through the domestic debt market.

An N80 billion bond due 2036 was sold at 16.28 percent against 16.77 percent at its last sale, while a 2021 debt was issued at 16.24 percent against 16.55 percent previously to fetch N30 billion. Another N50 billion due in 2027 was issued at par at 16.28 per cent. Total demand at the auction stood at N216.38 billion compared with N337.03 billion at last month’s sale.

Nigeria issues domestic bonds every month to raise money to fund its deficit, which also helps the banking system manage its liquidity.

Meanwhile, the Central Bank of Nigeria (CBN) yesterday said it sold more treasury bills than originally planned at an auction after it lured demand for one-year debt with yields above inflation. The bank raised N253.8 billion at an auction on Wednesday, N40 billion more than it had offered to sell.

Reuters also reported that it offered the one-year bill at 18.55 percent to raise N166.3 billion, against a yield of 18.49 percent at its last auction and higher than February’s inflation rate of 17.78 percent.

The central bank has been selling bills with yields below inflation in recent months to curb borrowing costs as it aims to fund half of this year’s forecast budget deficit.

Yields on the six-month bill were unchanged from the last sale at 17.20 percent to fetch N48.5 billion, while a N39 billion bill due in three month was sold 13.60 percent against 13.65 percent previously. Total demand stood at N216.38 billion against N312.44 billion at the last sale.

On Thursday, the debt office also issued more bonds than it originally planned at an auction after slowing inflation rate helped it offer debt at lower yields. The central bank issues treasury bills twice a month to finance the government’s budget deficit and help lenders manage liquidity and curb inflation.