Servicing of debts acquired through instruments issued by the Federal Government in the Nigeria capital market totaled N2.18tn as of October 30, an analysis of data by our correspondent has shown.
Data from listed debt instruments on the FMDQ Exchange showed that repayments by FG on bonds, promissory notes, Sukuk, savings and green bonds altogether amounted to N2.18tn.
FG bond payments are structured with coupons paid semi-annually and are used to fund specific infrastructure projects.
The Debt Management Office of Nigeria had disclosed in its Actual Domestic Debt Service reports for January-March and April-June that the Federal Government’s total domestic debt servicing gulped N546.25bn and N307.87bn, respectively. This meant the FG spent N854.12bn servicing capital market debts in the first half of the year.
The Federal Government serviced its NGFG9B2022S1 Jan 2022 N605.31bn bond with 16.39 per cent coupon as it paid N99.21bn in two tranches of January and June payments.
The Federal Government serviced another 12.75 per cent coupon April 2023 N735.96bn bond with payment of N93.83bn in two tranches, April and October.
FG’s N784.45bn Jan 2026 bond with 12.5 per cent coupon was serviced with January and June aggregate payments of N98.06bn.
FG made a total of N102.24bn in two payments for its N948.48bn March 2027 bond with a 16.2884 per cent coupon in March and September.
The N955.93bn Feb 2028 bond with a 13.98 per cent coupon gulped two interest payments in February and August, totaling N133.64bn.
The Federal Government also made a N5.63bn payment on a 15 per cent N75bn November 2028 bond and will complete 2021 servicing with another N5.63bn at the end of November.
In two payments of April and October totaling N97.1bn, FG serviced its 14.55 per cent N667.38bn bond while it payed N9.37bn in May for its 12.49 per cent N150bn May 2029 bond.
Speaking on why investors were attracted to FG issued bonds, the Managing Director of Credent Investment Managers, Ibrahim Shelleng, said, “FGN securities still remain attractive due to the assumed ‘risk free’ nature. “Globally, government securities are considered almost risk free as it is assumed that a government cannot become bankrupt as long as the sovereign entity remains. So institutional investors such as pension funds would always invest there.”
Olaide Baanu, a research analyst at Atlas Portfolios Limited said, “Investors choose FGN bonds for safety and funds preservation. An average investor wants where his capital is guaranteed, irrespective of the low or high returns.
Speaking on this, Shelleng stated that the coupon rates had to be attractive to get foreign investors that bring the much needed forex liquidity into the market.
Mr Sola Oni, the Chief Executive Officer of Sofunix Investments and Communications, said there was an irrevocable standing order that mandated the Federal Government to operate a Special Purpose Vehicle to hedge against default on the bond.