The Debt Management Office has said it plans to sell inflation-linked bonds to address the concern of investors about the impact of inflation on the domestic debt market.
Bloomberg quoted the Director-General, DMO, Mr. Abraham Nwankwo, as saying on Friday, “The inflation-linked bond is part of our 2013 to 2017 strategic plan. Part of the plan may be implemented this year where it is possible.”
Nwankwo added that DMO was also planning to sell N80bn ($505m) in Federal Government bonds in the form of global depository receipts and would introduce “bond switches and securities lending” to deepen the market.
He said all debt sold would be for specific infrastructural projects and would not exceed the target ratio of 25 per cent of Gross Domestic Product.
Inflation rate accelerated to 9.1 per cent in April from 8.6 per cent in the previous month, according to the National Bureau of Statistics.
The Monetary Policy Committee of the CBN held its third meeting of the year between May 20 and 21, 2013.
The committee reviewed the economic conditions and challenges facing the Nigerian economy against the developments in the international economic and financial market environment, with a view to reassessing monetary policy options in the light of the developments in the global economy and financial market.
At the end of the meeting, the committee retained the Monetary Policy Rate at 12 per cent and maintained the symmetric corridor of +/-200 basis points around the MPR; retained the Cash Reserve Ratio at 12 per cent; Liquidity Ratio at 30 per cent and Net Foreign Exchange Open Position at one per cent.
The yield on the country’s 16.39 per cent domestic bonds due January 2022 rose 45 basis points to 12. 29 per cent in the secondary market on Friday, according data compiled on the Financial Markets Dealers Association’s website.
The yield on the seven per cent domestic bonds due October 2019 rose 11 basis points to 11.80 per cent.
Nwankwo also said that 20 Nigerian companies raised about N200bn from the domestic bonds market between 2005 and 2012 to fund the real sector.
He added that the development was part of the achievements of the transformation agenda of the current administration.
He said, “This is important because it is in a process of managing Nigeria’s public debt that we develop the market to become useful for the private sector. Less than seven years, at least 20 companies in Nigeria have gone to market to fund the real sector of the economy.
“This has nothing to do with the government. It has to do with what we have done to transform the market.”
Nwankwo said that the DMO had transformed the market to raise long-term funds of up to 20 years from it.
The DG also disclosed that the office had made it possible for Nigerian companies to issue their own debt instruments in the international capital market to fund various projects in the country.
He said, “This helped to create a new window and benchmark for the private sector in the international market. Now, the international markets are now rushing for Nigeria’s bond in the market.
“In this aspect, we are impacting the real sector of the economy. Once your debt market is doing well, it will encourage investors to go into equity markets.”
Nwankwo said the current Strategic Plan 2013-2017 was aimed at consolidating on the gains of the first and second plans.
“It is also to finalise ongoing initiatives, explore new areas and maintain steady focus on the delivery of the office’s mandate,” he added.
The DG pledged to sustain the implementation of the strategic plan and strengthen the Federal Government of Nigeria bond market for enhanced liquidity.
He also said the office would strengthen the country’s presence in the international capital market through the issuance of $1bn Eurobond, N80bn FGN bonds and $100m Nigerian Diaspora bond.