Foreigners have invested $5.11b in FG bonds as at Dec., says DMO boss

Director-General of the Debt Management Office (DMO), Dr. Abraham Nwankwo, at the weekend urged Nigerian companies to take full advantage of the agency’s modest achievements in management of the nation’s public debt and awareness created about the country to access both the domestic and international capital market for medium to long-term growth funds.

According to Nwankwo, the Federal Government’s Eurobond, the International Finance Corporation’s Naira-denominated bonds (N12 billion) and domestic bond issuance has helped to among others create benchmarks for borrowing, besides diversifying the holding structure of FGN securities, achieving about 93 per cent non-Central Bank of Nigeria holdings. The balance, he explained, is held by the CBN through its operations in the discount window of the secondary market.

As a result of the diversification, he noted during a retreat in Lagos, “at the end of December 2012, foreign investors’ holdings in FGN securities amounted to $5.112 billion, compared to about $500 million as at end-January 2012.”

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Foreign investors’ holding in Federal Government securities, he said rose from near zero to 19.52 per cent between the first quarter of 2011 to 19.52 per cent at the end last year, while government’s cost of borrowing dropped with the yields falling by about 400 basis points between August and December 2012.

This, Nwankwo explained was besides the increased inflow of foreign exchange, resulting in external reserves growth and stability of the Naira exchange rate against major global currencies.

He added that with the increased appetite of foreign investors in Nigerian instruments, more borrowing space has been created “for other domestic borrowers to access funds in the local market, which addresses the risk of crowding-out the private sector.”

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With the creation of five, 10 and 20-year bonds, the DMO has successfully addressed “some of the challenges and constraints that faced Nigeria’s public debt management. The DMO has created windows of opportunities for the private sector to raise long-term capital for the development of the real sector and infrastructure.”

A total of 20 Nigerian corporates institutions, he continued, have raised N200 billion from the domestic bonds market in the seven years between 2005 and 2012, as part of achievements of the transformation agenda of the current administration.

Opportunities, he said, exist for growth in the number and diversity of debt issuers, range and size of instruments, as well as investor base.

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