Debt Management Office Update on Capital Market Activities in Nigeria for H1, 2019
In the first half of 2019, the Debt Management Office (DMO) in Nigeria presented significant developments from the Capital Market Committee meeting. Details include FGN securities issuances, auction results, listing of Eurobonds, issuance of Green Bonds, and introduction of a 30-year FGN Bond. These activities highlight the growing investor interest and positive market dynamics.
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Nigeria_coa DEBT MANAGEMENT OFFICE NIGERIA Update on the Activities of Debt Management Office for H1, 2019 Update on the Activities of Debt Management Office for H1, 2019 P PRESENTED RESENTED A AT T T THE HE S SECOND ECOND M MEETING S SECURITIES EETINGOF ECURITIESAND OFTHE THE C CAPITAL AND E EXCHANGE XCHANGE C COMMISSION APITAL M MARKET OMMISSION, L ARKET C COMMITTEE OMMITTEEOF , LAGOS OFTHE THE AGOS T THURSDAY HURSDAY, , AUGUST AUGUST 22, 2019 22, 2019
Nigeria_coa DEBT MANAGEMENT OFFICE NIGERIA Outline Outline Important Developments with Implication on Capital Market Activities from the Last CMC Meeting Factors Responsible for the Developments Challenges/Steps Taken Issue for CMC Deliberation
Nigeria_coa DEBT MANAGEMENT OFFICE NIGERIA Important Developments with Implication on Capital Market Activities from the Last CMC Meeting Table 1: FGN Securities Issuances and Redemption (N Billion) January June 2019 Quarter (2019) Types of Bond Total Issuance Redemptions 1 FGN Bonds 296.34 - FGN Savings Bond 1.023 2.067 2 305.55 351.30 FGN Bonds FGN Savings Bond 1.724 0.999 Green Bonds 15.00 619.637 354.366 Total Source: DMO Table 2: Auction Results (N Billion) (January June 2019) 12.75% FGN APR 2023 (Re-openings) 13.53% FGN MAR 2025 (Re-openings) 13.98% FGN FEB 2028 (Re-openings) 14.55% FGN APR 2029 (New Issue) 14.80% FGN APR 2049 (New Issue) Total Subscription Rate (%) Quarter Description Amount Offered 1 140.00 47.71 140.00 86.27 120.00 445.93 - - - - 400.00 579.91 Subscriptions 144.98 Allotments 11.15 37.90 247.29 - - 296.34 Average Marginal Rates Amount Offered 14.407% 14.516% 14.596% - - - 105.00 - - 115.00 80.00 300.00 2 Subscriptions 101.93 - - 236.80 241.81 580.54 193.51 Allotments 63.18 - - 108.79 133.58 305.55 Average Marginal Rates 14.303% - - 14.430% 14.657% - Source DMO
Nigeria_coa DEBT MANAGEMENT OFFICE NIGERIA Important Developments with Implication on Capital Market Activities from the Last CMC Meeting Listing of FGN Dual-Tranche US$2.5 billion and Triple-Tranche US$2.86 billion Eurobonds on the Nigerian Stock Exchange and the FMDQ OTC Securities Exchange The Debt Management Office (DMO) on June 14, 2019, listed the Dual-Tranche (7.143% US$1.25BN FEB 2030 and 7.696% US$1.25BN FEB 2038) and the Triple-Tranche (7.625% US$1.118BN NOV 2025, 8.747% US$1.0BN JAN 2031 and 9.248% US$750M JAN 2049) Nigeria s Eurobonds on The Nigerian Stock Exchange and the FMDQ OTC Securities Exchange, respectively. Issuance of N15 billion Second Sovereign Green Bond The DMO successfully issued a second Sovereign Green Bond on June 3, 2019. The N15 billion 7-year FGN Green Bond Due 2026 with Coupon Rate of 14.50% was oversubscribed by 220% which is an indication of increased knowledge and awareness of Green Bond by subscribers and perhaps also demonstrated a greater level of commitment from the general public towards protecting the environment. Issuance of a Federal Government of Nigeria (FGN) Bonds for 30 Years The DMO introduced a 30-year FGN Bond into the Domestic Debt Market in April 2019. This is the first time that a 30-year FGN Bond has been issued by the DMO. Between April and June 2019, the DMO sold N133.58 billion of the Bonds which is indicative of good investor appetite. Active trading in the Bond has started, thus elongating the Sovereign Yield Curve (which serves as a reference for pricing other securities and loans), to 30 years. 4
Nigeria_coa DEBT MANAGEMENT OFFICE NIGERIA Factors Responsible for the Developments The Issuance of Securities in the Domestic Capital Market is to meet the FGN s financing needs as provided in the 2019 Appropriation Act. The securities issued offer investors safe investment outlet for their funds and increases the volume available for trading in the secondary market. The Listing of the Eurobonds will further deepen the Domestic Capital Market. The Green Bond Issuance, which is the second time a sovereign Green Bond has been issued contributes to the diversity of products in the domestic capital market while also offering an appropriate security to investors with a preference for sustainable financing. For the FGN, it further enables the achievement of its targets under the Paris Club Agreement on Climate Change as the proceeds are being used for developing projects in Irrigation, Afforestation and Ecological Restoration. The introduction of 30-yr FGN Bond was done to extend the Yield Curve, further lengthen the maturity profile of the debt portfolio, and in particular, to provide investment outlets to the Annuity sub-sector of the Pension and Insurance industries. 5
Nigeria_coa DEBT MANAGEMENT OFFICE NIGERIA Challenges/Steps taken The DMO has continued to structure its Issuance programme to, among others, ensure that the Government borrows at reasonable cost, as well as to sustain its developmental role in the domestic debt market. No major challenges were experienced in Q2 2019 as demand for securities issued was high and Interest Rates remained at slightly lower levels when compared to H2, 2018. 6
Nigeria_coa DEBT MANAGEMENT OFFICE NIGERIA Issue for CMC Deliberation CMC needs to prioritize the mobilisation of funds into the capital market. 7
Nigeria_coa DEBT MANAGEMENT OFFICE NIGERIA Thank you 8
