FBNQuest applauds DMO, says it can’t be held accountable for fiscal shortcomings

FBNQUEST, THE MERCHANT banking and asset management business of FBN Holdings Plc., has applauded the Debt Management Office (DMO) for fulfilling its remit of raising a target N790 billion in domestic financing within the 2018 budget, saying the DMO cannot be held responsible for broader fiscal shortcomings like the implementation of the budget.

“The DMO is fulfilling its remit, there are no sizeable federal government bond maturities remaining this year, but they cannot be held responsible for broader fiscal shortcomings,” the asset managers said.

“The budget office’s Budget Implementation Report for Q4 2017 shows a full-year deficit of N3.81 trillion as against the target of N2.36 trillion, of which N1.30 tril- lion was unfunded after mandated borrowing of N2.51 trillion through the DMO,” they added

At its latest monthly auc- tion of FGN bonds this week, the DMO offered N115 billion, attracted a total bid of N144 billion and raised N88 billion from sales. It offered the same paper for the sev- enth month in succession and plans the same for what remains of Q4 2018.

The Federal Government Bonds at the auction were allotted at 12.75 percent for the 5-year, 13.53 percent for the 7-year and 13.98 percent for the 10-year bond.

The DMO said that out of the N35 billion offered for the 5-year bond, subscriptions to the value of N16.50 billion was received, while only N12.65 billion was allotted.

It also said that for the 7-year paper, N24.90 billion subscriptions were received for the N35 billion on offer, however, N20.14 billion was allotted.

Of the three, only the 10year paper had allotments beyond what was originally offered.

The marginal rate was 7 basis points higher than in September for the 10-year benchmark and unchanged for the two other instruments on offer. The overall sales were marginally down on the previous month and again concentrated on the longest maturity on offer.

On the reducing offshore bids, FBNQuest said that the decline is set to intensify in light of the US monetary policy.

“On the demand side, the offshore bid at auction has declined in recent months. We understand that it was little more than N10 billion in September. This is consistent with broader global trends, speaking of the retreat of varying degrees from emerging or frontier markets.

“These pressures are not set to go away: rather, they are likely to intensify as the normalization of US monetary policy continues. The issue is the size of the hit Nigeria will take,” they said.