By Omobolaji Solagbade with agency report

The Debt Management Office said on Thursday it sold N93bn ($604.3m) in three, five and 10-year sovereign bonds on Wednesday, at its eighth debt auction of the year.

The DMO said it sold N30bn of the three-year, N15bn of five-year and N25bn of 10-year papers, due to mature in 2014, 2015 and 2018 respectively. All the papers are reopening of previous issues.

It added that an additional N23bn in the three-year paper were sold to some mandate customers outside the auction.

The three-year paper was given a marginal rate of 10.75 per cent, above 10.24 per cent offered last month, while the five-year instruments were allotted at 11.19 per cent against 10.70 per cent. However, the 10-year papers were allotted at a marginal rate of 11.39 per cent, lower than the 11.49 per cent at the previous auction.

Total subscription stood at N170.52bn compared to N157.98bn last month, the DMO said.

“The original coupon rates of 10.50 per cent, 4.0 per cent and 10.70 per cent for the three-year, five-year and 10-year offers respectively will be maintained,” the debt office said in a statement.

The Central Bank of Nigeria on July 1 lifted a restriction requiring foreign investors to hold government debt for at least a year, aiming to attract new offshore inflows into the economy.

Reuters quoted an official as saying, “The DMO usually sells bonds to some mandate customers with large volumes of funds outside the auction proper. If such customers are allowed to participate in the auction, they might crowd out other investors, hence the special allotment outside the usual auction.”

Dealers said appetite for the papers was high due to large cash inflows into the system from July budgetary allocations to government agencies.

The Federation Account Allocation Committee distributed about N616bn from federation accounts to the three tiers of government on Friday, and a portion of the funds were gradually flowing into the system this week ahead of the auction, traders said.

Nigeria issues sovereign bonds monthly to support the local bond market, create a benchmark for corporate issuance and fund its budget deficit.

Meanwhile, the naira was flat against the United States dollar on the inter-bank market on Tuesday and became weaker at the CBN’s bi-weekly auction after all the demand for the greenback was not met. The local currency closed at N153.80 to the dollar, equal to Tuesday’s close, though it had traded higher at N153.90 to the dollar mid-session, after the CBN auction result showed a $176m supply shortage and a slight depreciation in the local currency. The apex bank sold $350m at N151.35 to the dollar at its auction, short of the $475.6m demanded and the $400m sold at N151.01 to the dollar on Monday.

Source: Punch