In the span of four months, the Federal Government successfully raised a total of N11 trillion through auctions and sales of Treasury bills and savings bonds, as per recent research by NewsNow.
A closer examination of the results from bond and bill issuances by the Central Bank and the Debt Management Office for the period of January to April 2024 revealed that the government secured N3.1 trillion from FGN bonds and 7.92 trillion from T-bills, amounting to a total of N11.2 trillion.
These bonds are integral tools in the government’s debt management strategy, serving various purposes such as providing a secure investment option for investors, aiding in the regulation of the country’s debt profile, and enabling efficient fund management.
Treasury bills and FGN bonds are considered risk-free investments, virtually zero-risk, as it is assumed that the government will always honor its debts. In case of any shortfall, the government retains the option to print money for repayment.
Notably, in January 2024, the Federal Government garnered around N418.197 billion from four bond auctions, followed by N1.49 trillion from two FGN bond offerings by the DMO in February, slightly below the target of N2.5 trillion.
March 2024 saw the DMO raising approximately N475.67 billion through its bond auction, capitalizing on the current surge in interest rates, while in April 2024, the Federal Government garnered N626.8 billion in its FGN bond auction.
This figure marked a 32% increase from the N475.67 billion raised in the March auction, signifying robust market confidence in the government’s creditworthiness.
Regarding T-bills, despite offering a total of N1 trillion, the January subscription exceeded expectations, with investors committing a substantial N2.3 trillion. The one-year bill, with an offer of N600 billion, garnered a massive N1.8 trillion subscription, of which the central bank sold N908.7 billion.
During March 2024, the DMO sold bills worth N2.69 trillion in its auctions, reflecting an N11 billion increase compared to the value of T-bills sold in February 2024 (N2.589 trillion).
Additionally, in a successful T-Bills auction conducted by the CBN on April 24, 2024, approximately N362.45 billion was raised across different maturity periods, indicating a strong market demand for government securities.
This substantial fundraising occurred in line with the government’s objectives of funding the 2024 budget deficit of N9.18 trillion and settling debts, including Ways and Means Advances.
To address the debt obligations, the government allocated about N4.83 trillion from the funds generated through Nigerian Treasury Bills and Bonds issued in 2024, as stated by the Minister of Finance, Wale Edun.
Economist Professor Sheriffdeen Tella, in a discussion with our correspondent, highlighted bonds and treasury bills as effective means to raise capital while reducing external debts.
He emphasized that these fixed-income securities serve a dual purpose of fundraising for the government and managing liquidity in the financial system.
Tella emphasized the potential for Nigerians to earn returns through the interest rates offered on these instruments, underscoring that bonds mature after at least two years, while treasury bills have varying maturities ranging from three months to one year, offering a shorter investment option.
Despite the significant funds raised through these avenues, experts suggest that increased financial literacy initiatives could unlock more opportunities for Nigerians.
Tajudeen Ibrahim, Director of Research and Strategy at Chapel Hill Denham, noted that the lack of financial knowledge among Nigerians was hindering them from leveraging treasury bills and bonds as viable investment options.
Ibrahim highlighted the need for the government to boost public awareness of financial literacy and investment alternatives to attract more investors.
He stressed the role of financial institutions and regulators in educating the public about investment opportunities and suggested improving financial literacy over time to enhance participation in these investment instruments.
Regarding the registration process, interested individuals can open investment accounts with portfolio investors, financial institutions, or insurance companies, providing instructions for investing in profitable bonds based on data analysis.
Ibrahim explained that through financial advisers or investment management firms, individuals could initiate investments in treasury bills and savings bonds, tailoring their investment strategy based on risk appetite and age to maximize returns compared to traditional savings accounts.