Technical issues set to affect N100bn bond sale

by Tunji Andrews

Nigeria plans to sell N100 billion ($615 million) worth of bonds with maturities ranging from 3 to 20 years at an auction next Wednesday, the Debt Management Office said on Wednesday.

However, it is thought that tight liquidity and banks’ lack of access to their credit balance at the Central Bank of Nigeria (CBN) could dampen demand at the debt auction where yields are seen climbing marginally higher than at the previous auction.

Technical glitches at the CBN have denied banks’ access to their balances with the regulator in the last four weeks, putting most dealers in the dark about the volume of liquidity available in the market to trade with.

At similar auction last month, the 3-year paper fetched 11%, 10-year paper attracted 12.19%, while the 20-year debt note fetched 12.14%.

Traders said they expected yields to inch up slightly to 11.05% on the 3-year paper and 12.2% on the 10- and 20-year paper due to expected weak demand and a lack of information to trade with.

The bonds are re-openings of previously issued debt notes, the debt office said, noting that the results of the auction will be released the following day.

Also, Nigerian Interbank Offer rates climbed to an average of 12% on Friday, from 10.37% last week, on the back of massive NNPC cash during the week. NNPC withdrew portion of its deposits with some lenders to its account with the central bank this week, after it sold about $400 million to some banks this week, draining liquidity from the system and raising on the cost of borrowing among banks.

The Nigerian energy firm, which accounts for the bulk of dollars traded on the interbank market, sold the greenback to some lenders this week, and withdrew the proceeds to its account with the central bank.