FG lowers August bond offer to N1.1trn as retail demand cools

The Federal Government is offering N1.1 trillion in FGN bonds this month, N100 billion below July’s offer, even as the latest Federal Government of Nigeria Savings Bond (FGNSB) allotment shows softer retail investor participation, raising questions about the depth of demand for government paper across investor segments.

The Debt Management Office (DMO) announced the August bond offer on Thursday, with the government reopening three bonds with 10-year, 15-year and 20-year maturities at the August 17 auction.

The latest offer is 8.3 per cent below the N1.2 trillion offered in July, when investors submitted bids worth about N1.74 trillion, indicating demand that exceeded the amount initially put up for sale.

The August offer comprises N250 billion of the 10-year 22.60 per cent FGN January 2035 bond, N750 billion of the 15-year 15.45 per cent FGN June 2038 bond and N100 billion of the 20-year 16.2499 per cent FGN April 2037 bond.

The auction is scheduled for August 17, with settlement due on August 19, while investors will subscribe at N1,000 per unit, with a minimum subscription of N50.001 million.

The lower primary-market offer comes as the DMO’s latest retail bond result showed that the government raised N5.86 billion through the August FGNSB programme, down from N6.19 billion in July.

The August savings bond consisted of a two-year instrument paying 13.963 per cent and a three-year bond offering 14.963 per cent. The two-year paper attracted 1,295 subscriptions and N1.318 billion in allotments, while the three-year instrument recorded 2,882 subscriptions and N4.545 billion in allotments.

The combined retail allotment was therefore about N330 million, or 5.3 per cent, lower than the July amount despite the government’s continued use of the savings bond to broaden access to government securities.

July’s FGNSB offer carried higher coupons of 14.716 per cent and 15.716 per cent for the two-year and three-year instruments respectively and generated N6.193 billion.

The contrasting results suggest that demand for government securities is not uniform across investor categories, with institutional demand for longer-dated FGN bonds remaining stronger than retail participation in savings bonds.

The government’s domestic borrowing programme remains substantial, placing investor demand and borrowing costs under scrutiny. FGN bonds account for N63.45 trillion, or 76.56 per cent, of the Federal Government’s domestic debt, according to the DMO data supplied.

Treasury Bills account for another N16.57 trillion, while FGN Sukuk stood at N1.19 trillion and Savings Bonds at N116.21 billion.

The August bond auction will therefore provide a fresh indication of how investors are pricing government debt across the yield curve and whether demand remains strong enough to support the Federal Government’s domestic financing programme without significant upward pressure on borrowing costs.

With the government reducing its offer after July’s N1.74 trillion demand, the outcome of the August auction will be closely watched for evidence of whether appetite for longer-term sovereign securities is strengthening or beginning to moderate.