•Govt to float social bonds
The Debt Management Office (DMO) has lamented that Central Bank of Nigeria (CBN)’s policies are having adverse effect on the liquidity at the financial markets, making it difficult to sell even sovereign instruments that are regarded as risk-free.
Director General, Debt Management Office (DMO), Ms. Patience Oniha, made this disclosure at the IFN Africa Dialogue and Report 2022, which was streamed live on YouTube.
She pointed out that “in the domestic market, rates have gone up. So, the amount of liquidity available for banks to invest in Federal Government of Nigeria (FGN) securities and probably other securities are limited.”
In October, the DMO could not raise N117 billion from the sale of FGN’s N225 billion bond programme because subscription weakened during the October FGN bond auction.
The DMO offered N225 billion for subscription to investors but was only able “to raise N107.88 billion through re-openings of the 14.55 per cent FGN APR 2029, 12.50 per cent FGN APR 2032 and 16.25 per cent 2037 FGN bonds”.
This implies that as the federal government is having difficulty raising funds to fund its budget, the widened budget deficit may further put pressure on government’s finances, especially in the areas of capital projects.
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Oniha attributed the difficulties in raising funds from bonds “to monetary policies”, adding that “liquidity is getting thinner as interest rates are rising”.
According to her, while the perception was that the funds to purchase these bonds were there, the DMO over the months had “to undertake severe marketing to convince investors to buy bonds”.
“The initial assumption was that there were investors but the products were not there. I think I certainly can say that for each of the Sukuk we issued; it has not been an easy sell. It hasn’t been that the money was waiting just for the security to be issued.
“There was aggressive marketing behind the scene apart from the usual offer circulars, roadshows, meeting with various investor groups even after the roadshows.
“But it has been a hard sell. Sometimes, we’ve had to extend the offer period,” Oniha said.
She pointed out that “the success in the bond market so far has been driven by domestic investors not foreign investors”.
She hinted that Nigeria may go beyond Sukuk bond and explore social bonds to raise more funds for the country.
A social impact bond, also known as a social benefit good or social bond, is a type of financial security that provides capital to the public sector to fund projects that will create better social outcomes and lead to savings.