Nigeria to raise 135-235 bln naira debt in Q4

 Nigeria plans to issue between 135-235 billion naira ($843.49 mln-$1.47 bln) in sovereign bonds maturing in August 2016 and July 2030 in the fourth quarter of the year, the Debt Management Office (DMO) said on Thursday. 

DMO DG, Nwankwo

   The amount being proposed is within the volume of actual debt issuance in the third quarter, totalling 203.78 billion naira. 
   Latest date released by the DMO showed that it plans to auction between 45-80 billion naira each in 3-year and 20-year paper on October 16 and November 13, respectively, while the debt office will issue 45-75 billion naira of the same maturities on December 11. 
   All the bonds were re-openings of previous issues.
FBN Capital in a research note stated that  the DMO has raised N704bn (gross) from the auction of bonds in the first nine months. Domestic financing (net) for the full year is projected at N577bn in the 2013 budget, and the deficit at N887bn.
" Once we exclude domestic borrowing per the budget and the issue of Eurobonds in July to raise US$1bn, there remains a financing gap of about N150bn. Proceeds from the unbundling of the Power Holding Company of Nigeria (PHCN) amount to about N300bn. However, they have already been allocated to severance payments for PHCN employees, for which full provision was not made in the 2013 budget. It is unclear, therefore, whether they will be treated as asset sales for deficit financing."
The investment arm of First Bank also noted that:

·         Figures from the CBN indicate that the FGN deficit for H1 2013, at N627bn, was running well ahead of budget.

·         The DMO consults domestic stakeholders on its calendar. The menu for Q4 is divided between the reopening of two issues, the 13.05% Aug ‘16s and the 10.00% Jul ‘30s (Nigeria’s long bond). These are not the favoured instruments of the offshore community.

·         The total bid has averaged N160bn over the past year. The one problematic auction came in June when the DMO offered N85bn and raised just N21bn. Tapering concerns had pushed up a majority of bids.

The DMO should therefore be able to achieve its programme in comfort. We do not see a clear direction for yields, which may well continue to move within their range of 13% to 14% of the past three months. A correlation with inflation is for another day.