FG Borrows N13.6tn Amid Rising Deficit Financing

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FG Borrows N13.6tn Amid Rising Deficit Financing
FG Borrows N13.6tn Amid Rising Deficit Financing

The Federal Government’s bond offer and allotment increased by N1.99 trillion in the first six months of this year to N13.66 trillion, up from N11.67 trillion in the same period last year.

The Central Bank of Nigeria‘s Financial Markets Department stated this in its half-year activity report for 2021.

It ascribed the increase to the government’s push to fund the fiscal deficit through the domestic market.

The report stated, “In the review period, FGN bonds worth N900bn was offered, while public subscription and sale stood at N1.73tn and N1.42tn, respectively. The amount offered comprised new issues and re-openings of FGN bonds.

“In the corresponding period of 2020, FGN bonds issue, subscription and allotment were N615bn, N2.45tn and N1.31tn, respectively. The increase in offer and allotment in the first half of 2021 was attributable to the government’s drive to fund fiscal deficit from the domestic market. Consequently, the total value of FGN bonds outstanding at end-June 2021 stood at N13.66tn, compared with N11.67tn at end-June 2020, indicating an increase of N1.99tn or 17.01 per cent.”

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According to the study, no new Federal Republic of Nigeria Treasury Bonds were issued in the first half of 2021.

As a result, it noted, the outstanding stock was at N100.99 billion, the same as at the end of June 2020.

A breakdown of the outstanding indicated that the CBN had N18.01 billion, while the sinking fund held N82.98 billion.

The CBN had N27.99 billion in the equivalent period of 2020, it added, while N73 billion was maintained in the sinking fund.

According to the study, “the total NTBs issued and allotted during the first six months of 2020 were N1.6tn apiece, showing an increase of N149.94bn or 9.89% over N1.52tn issued and allotted during the equivalent period of 2020.”

“Total public subscriptions stood at N3.1tn, compared with N2.9tn in the corresponding period of 2020.

“The increase in public subscription was attributed to the increased yield on NTBs, which was market-driven amidst investors’ demand for higher yields.”

It went on to say that the instrument’s holding structure revealed that Deposit Money Banks accounted for N1.25 trillion, or 75.31 percent, while mandate and internal funds customers, including CBN branches, accounted for the remaining N411.22 billion, or 24.69 percent.

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