Nigeria’s first domestic dollar-denominated bond has added N1.47 trillion to the country’s total domestic debt.
This is according to the latest domestic debt report from the Debt Management Office (DMO).
Nairametrics observed that the bond constitutes 2.12% of the total domestic debt stock, which stood at N69.22 trillion as of September 30, 2024.
The issuance of the domestic dollar bond marks a significant step in the Federal Government’s efforts to diversify funding sources and attract foreign investments. Unlike naira-denominated instruments, this bond allows investors to gain exposure to Nigeria’s economy without the currency risk posed by naira fluctuations.
Other domestic debt components
Domestic debt recorded mixed performance, declining by 5.34% in dollar terms from $48.45 billion in June to $45.87 billion in September. In naira terms, however, domestic debt increased by 3.10%, from N71.22 trillion to N73.43 trillion.
- FGN bonds: Federal Government bonds remained the largest component of domestic debt, increasing by 4.47% to N54.65 trillion in September, up from N52.32 trillion in June. This represents 78.95% of the total domestic debt stock, an increase from 78.13% in the previous quarter.
- Nigerian Treasury Bills: The second-largest domestic debt component, Treasury Bills, declined marginally by 0.66% to N11.73 trillion, from N11.81 trillion in the previous quarter. This reduction aligns with efforts to moderate short-term debt and mitigate rollover risks.
- Promissory notes: Promissory notes, used to settle government obligations, grew by 5.80%, increasing from N1.67 trillion in June to N1.77 trillion in September.
- FGN Sukuk: Federal Government Sukuk, an infrastructure funding instrument, declined by 9.14% to N992.56 billion, down from N1.09 trillion.
- FGN Savings Bonds: Savings bonds increased by 16.11% to N64.09 billion, reflecting growing retail investor participation.
- Green Bonds: Green bonds remained unchanged at N15 billion, maintaining their minimal contribution of 0.02% to the domestic debt stock.
What you should know
Nairametrics earlier reported that Nigeria successfully launched its first-ever domestic dollar-denominated bond, seeing over $900 million in subscriptions.
- The $500 million bond, coordinated by the Africa Finance Corporation (AFC), marks a pivotal moment in Nigeria’s economic development and highlights the growing confidence in the country’s capital market.
- The five-year bond, which was issued at par with a 9.75% annual coupon, witnessed a 180% subscription.
- This overwhelming interest from investors highlights the strong domestic confidence in Nigeria’s economic growth prospects, as well as the strategic role of the AFC in deepening the domestic capital markets.
According to a statement from the AFC, investors for this bond issuance ranged from local Nigerians and non-Nigerians residing in the country to Nigerians in the Diaspora and major institutional investors.
In a separate statement, the Ministry of Finance hailed the bond issuance as a landmark achievement for Nigeria, positioning the country as a leader in financial innovation in Africa. The Minister of Finance, Wale Edun, emphasized the importance of this milestone for the country’s financial strategy.
The funds raised from this bond issuance are set to be channelled into critical infrastructure projects and development programs that will bolster Nigeria’s economic growth.
