The Federal Government of Nigeria is planning to raise not more than N1.8 trillion from the bond market in the first quarter of 2025, according to the Debt Management Office (DMO).
The issuance, outlined in the newly released FGN Bond Issuance Calendar, highlights a mix of re-opened and new bonds across three monthly auctions scheduled for January, February, and March 2025.
This funding effort is part of the government’s strategy to address fiscal deficits and fund critical infrastructure.
For 2025, the Federal Government is projecting a budget deficit of N13. 08 trillion, representing 3.87% of the country’s Gross Domestic Product (GDP).
Breakdown of the bond offer
- The bond calendar includes a re-opening of the 19.30% FGN APR 2029 bond, which has a remaining tenor of four years and three months. The government plans to offer between N150 billion and N200 billion in each of the three auctions, making this bond a key component of the overall issuance.
- Similarly, the 18.50% FGN FEB 2031 bond will be re-opened, with a tenor of six years and one month as of January 2025. This bond will also be offered in the range of N150 billion to N200 billion per auction.
- A new bond, referred to as FGN JAN 2035, will make its debut in the market, targeting investors seeking longer-term instruments. With an original tenor of 10 years, this bond will equally be offered within the N150 billion to N200 billion range at each auction. Combined, the three categories of bonds aim to raise a total of N450 billion to N600 billion per auction.
If the maximum offer range is achieved across all auctions, the government would secure N1.8 trillion for the quarter.
The auctions are scheduled for January 27, February 24, and March 24, 2025. While the calendar remains subject to change, the structured approach demonstrates the government’s focus on meeting its financing needs in a transparent and predictable manner.
Implications for the economy
The planned bond issuance is expected to play a critical role in addressing Nigeria’s fiscal challenges, particularly its widening budget deficit.
- By leveraging the bond market, the government aims to raise funds for vital infrastructure projects and other development initiatives. The issuance also highlights the government’s reliance on domestic borrowing to complement other revenue streams, such as taxes and external loans.
- There will likely be significant interest in the bonds due to their competitive coupon rates, especially in a high-interest-rate environment. The mix of medium- and long-term bonds ensures that a broad range of investors, from pension funds to individual buyers, will find suitable options for portfolio diversification.
- Also, the bonds’ tenors provide a balance between meeting immediate liquidity needs and spreading out repayment obligations over an extended period.
- The success of these auctions will also signal the strength of investor confidence in the Nigerian economy and the government’s fiscal management.
As the economy grapples with inflationary pressures and revenue shortfalls, raising the targeted amount from the bond market will be crucial for sustaining economic activities and ensuring the government can meet its obligations.