FGN bonds account for 61% of domestic debt

The Federal Government of Nigeria bonds account for 60.63 per cent of the nation’s domestic debt.

Statistics obtained from the Debt Management Office on Monday showed that the FGN bonds contributed N4,792,281,221,000 out of the country’s total domestic debt of N7,904,025,474,000 as of December 31, 2014.

Nigerian Treasury Bills, on the other hand, accounted for N2,815,523,753,000 or 35.62 per cent of the Federal Government’s total domestic debt profile, while treasury bonds accounted for N296,220,500,000 or 3.75 per cent of the domestic debt.

Development stocks and promissory notes, two instruments that have been used in the past to raise funds for the government, are no longer in use as they did not appear on the list of instruments currently being used by the DMO to raise funds.

As of June 30, 2010, development stocks accounted for N220m or 0.01 per cent, while promissory notes accounted for N63.03bn or 1.67 per cent of the Federal Government’s domestic debt profile.

In contrast to development stocks and promissory notes, FGN bonds have been rising in importance since the government started honing the domestic debt market following the exit of Nigeria from the external debt trap between 2005 and 2006.

FGN bonds have since then been sold on monthly basis to institutional and individual buyers to raise funds for the government. The tenor, yield and subscription of the monthly bonds differ.

A summary of the issues offered in April, for instance, showed that while the FGN bonds, with a tenor of five years, attracted a subscription of N45.93bn; the 10-year-tenor bonds attracted subscription of N69.48bn. The longer tenor bonds of 20 years attracted N70.21bn subscription.

Oversubscriptions are usually refunded to subscribers. The bonds are usually attractive to investors because of the stability of the issuing authority, while the proceeds are used to fund Federal Government’s projects as part of the sources of funds for the annual budget.

Our correspondent had reported that the debt profile of both the Federal Government and the 36 states of the federation as well as the Federal Capital Territory rose by N1.2tn within one year, from N10.04tn on December 31, 2013 to N11.24tn as of December 31, 2014.

The increase in the debt profile of the nation within the one year period reflected an increase of 11.94 per cent.

The debt profile showed that the domestic debt of the Federal Government rose from N7.12tn to N7.9tn within the period.