The federal government plans to sell 70 billion naira ($458.3 million) in three, five and 10-year sovereign bonds on August 17, its eighth debt auction of the year, the Debt Management Office said yesterday.
The debt office said it would sell 30 billion naira of the three-year, 15 billion naira of five-year and 25 billion naira of 10-year papers, due to mature in 2014, 2015 and 2018 respectively.
All the papers are re-openings of previous issues and the results of the auction will be published the following day.
The country issues sovereign bonds monthly to support the local bond market, create a benchmark for corporate issuance and fund its budget deficit.
However, the Debt Management Office (DMO) yesterday said it has established a domestic debt market as alternative source of borrowing for both government and the organised private sector.
Director-general of DMO, Mr. Abraham Nwankwo, made this known in Abuja when Prof. Chudi Uwazuruike, a member of the House of Representatives, representing Ehime-Mbano Federal Constituency in Imo State paid him a courtesy visit.
“We took a decision to focus on developing the domestic debt market for a number of reasons; first of all was so that government could have an alternative source of funding if it must borrow, let it not be constrained to borrow from external sources only, let it have a choice .
“We thought that was important to have a long-term for government to have a choice not to rely only on external borrowing.
“The second is that we wanted also to develop the domestic market so that other stakeholders that are not government, particularly the corporates could also borrow long-term from this market for the purpose of developing the real sector of the economy and infrastructure,” he told the News Agency of Nigeria.
According to him, though Nigeria has some external debt it was managing, there would still be the need to borrow from appropriate sources for long-term development of the country.
“So by developing a market where government can issue bonds just like where private companies issue debentures, government will be subjected to the discipline of the market,’’ he added.
Commenting on the bond market, Nwankwo said that as at 2003, there was no market for long-term funding in the country, but noted that since 2003 till date, the DMO had been able to resuscitate the bond market
“We have been able to resuscitate the market in such a way that we have established three-year, five-year, seven-year and 10-year bonds. By November 2008, we issued 20-year bonds in the Nigerian market,’’ he said.
He added that both government and the private sector could now buy bonds in the capital market, adding that efforts had been made to strength the secondary debt instrument to make the market more liquid.
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