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The Debt Management Office (DMO) is to raise between N260 billion ($1.30 billion) and N350 billion ($1.75 billion) from primary issue in the first quarter of 2016, according to its provisional issuance calendar for Q1 2016.
It plans to raise the funds without an approved budget in place.
A look at the provisional issuance calendar showed a sharp increase from the calendar for Q4, 2015, which was a range of between N180 billion to N270 billion.
Analysts, however, believe the increase is normal because debt offices globally like to front-load their issuance.
Meanwhile, It’s revealed that the plan to raise N980 billion as stated in the current budget proposals, which projects net domestic borrowing of N980 billion this year, may not materialise.
This is because holders of the Aug ‘16s FGN bonds with a face value of about N560 billion will have to be repaid this year. Analysts also believe the situation would be made much worse by a low expectation of offshore buying interest in FGN bonds.
“We assume that the DMO has low expectations of offshore buying interest and will therefore be looking to the domestic market to meet its targets. To give some perspective to the calendar, we note from PenCom data that the PFAs held N2.8 trillion in FGN bonds at end-October, equivalent to 56.2 per cent of their assets under management (AUM). (The share of ordinary shares was 9.9 per cent),” said analysts at FBN Capital.
A further look at the provisional issuance calendar showed that the DMO plans to launch two new benchmarks (for ten-year and 20-year paper this month and March respectively).
Stakeholders believe the DMO is introducing the paper because such issues tend to generate their own demand for reasons of novelty.
Analysts disclosed that the 20-year instrument should prove popular with the Pension Fund Administrators (PFAs) as a match for their long-term pension liabilities.
To boost its revenue for 2016, the analysts called on the federal government to consider a review of waivers and exemptions.
They said: “The administration pledged not to hike direct taxes. It should be able to boost other revenue considerably now that the Treasury Single Account (TSA) is in operation.”
