As the low-interest regime that characterized most of 2020 continues with no immediate sign of an increase, pension fund managers have also continued to rid their portfolios of treasury bill investments.
Analysis of the recently released September 2020 edition of Pension Fund assets, by the Pension Commission of Nigeria, PenCom, shows that pension fund managers reallocated their assets away from treasury bills to FGN Bonds.
In the month of September 2020, according to the latest report, pension fund managers closed out of treasury bill positions worth N0.224 trillion while loading up on FGN bonds worth N0.254 trillion. Since the beginning of 2020, pension fund managers have moved out about N1.112 trillion of treasury bills investments into mostly FGN Bonds.
At the beginning of 2020, total pension fund assets invested in treasury bills stood at N1.88 trillion, but that has fallen to N0.78 trillion as at the end of September 2020. Put in another way, as at the end of 2019, 18.4% of pension fund assets were invested in treasury bills but as at September 30, 2020, pension funds’ treasury bill investment stood at 6.7%
Implications for domestic borrowing and monetary policy
Treasury bills serve a whole lot of purposes for the government. They are used as a means for the government to borrow to cover short term budgetary deficits as well as a means for the Central Bank to manage the supply of money and its inflationary effects.
With the increasing and seeming lack of interest by pension fund managers, who, usually are big players in the treasury bill market, the government may find it a bit problematic raising the much-needed domestic borrowing from them.
In like vein, the Central Bank’s ability to implement monetary policies through treasury bills and others, open market operation, may also suffer. May be, fiscal policy may become a more potent instrument of economic management, if that happens.
DMO reveals what infrastructure Sukuk Fund is financing
The Debt Management Office revealed that Sukuk funding is currently rehabilitating the Outer Marina Road in Lagos.
The Debt Management Office revealed that Sukuk funding is currently rehabilitating the Outer Marina Road which is a major road connecting Lagos Island to Victoria Island, Falomo and Ikoyi.
The DMO disclosed this in a statement on Wednesday evening.
“While the Outer Marina Road is a major artery on its own, It will also be instrumental to easing the traffic in Lagos during the repair of Falomo Bridge. Thanks to the SUKUK, we are able to rebuild Nigeria one infrastructure at a time,” it said.
— DMO Nigeria (@DMONigeria) April 7, 2021
What you should know
The Debt Management Office (DMO) announced last month that it listed its third sovereign Sukuk, N162.557bn 7-year 11.200% AL Ijarah Sovereign Sukuk due 2027, on the Nigerian Stock Exchange and the FMDQ Securities Exchange.
FG moves to issue Eurobonds, to select advisers through open bid
The amount to be raised is expected to be within the external borrowing plans for 2021.
The Federal Government has concluded plans to issue Eurobonds for 2021 and is going to pick advisers to the transaction through an open bid process.
The amount to be raised is expected to be within the external borrowing plans for 2021. The Federal Government in 2021 plans to raise $6.14 billion (N2.34 trillion) from foreign sources.
This disclosure was made by the Director-General of the Debt Management Office (DMO), Patience Oniha, during a chat with Reuters on Wednesday, April 7, 2021.
The Federal Government, who had earlier planned a Eurobond issue early last year after its sixth sale in 2018 where it raised $2.86 billion, deferred such plans due to the disruptions caused by the outbreak of the coronavirus pandemic.
The DMO boss at an investors conference with the Federal Government put together by Citibank, last year, said that the Federal Government had no plans to source debt from Eurobond in 2020 as it is going to shift its focus to domestic borrowing and sourcing from concessionary sources.
Earlier this year, Nigeria reduced its external borrowings in a new debt strategy after it redeemed its 6.75% $500 million Eurobond in January with Oniha saying that the DMO was monitoring international markets for new issues by frontier countries.
What you should know
- Ghana had some time last week raised $3 billion from Eurobonds, a year after the outbreak of the coronavirus pandemic, which disrupted economic activities globally.
- This will be a huge boost for Nigeria especially at a time the Federal Government is still struggling to get approval for the $1.5 billion loan from the World Bank due to issues on currency reforms.
- The Institute of International Finance had said it expected African governments to return to capital markets this year to sell bonds as investors embrace more risk.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- NASD Plc announces admission of newly demutualized NGX shares.
- Lotus Halal Fixed Income announces dividend of N20 per unit for Q1 2021.
- Friesland Campina Wamco Nigeria Plc announces AGM, proposes dividend of N6.74 per share.
- ETI appoints Akin Dada as Group Executive, Corporate & Investment banking.
- Union Homes REIT proposes final dividend worth N465.03 million for shareholders.