The Nigerian Bond Watch @ 151012 - DLM

Proshare

Monday, October 15, 2012 11:01 AM / DLM Research

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Analysis

Highlight of the week under review are the treasury bills auction and the presentation of Nigeria’s proposed appropriation bill for the 2013 fiscal year to the national assembly by the president.

At the treasury bills auction, N30.16 billion worth of 91day bills was offered and sold at the rate of 13.00% against 12.70% at the previous auction, whilst N73.49 billion and N68.18 billion worth of 182day and 364day were offered and sold at the rate of 13.34% and 13.39% respectively against 13.30% and 13.05% during the last auction. Total subscription during the auction was N356.07 billion versus N220.88 billion at the last auction; meanwhile, the 364day bills recorded the highest demand at the auction. In addition a total of N171.83 billion worth of treasury bills across all the maturities were allotted on non-competitive basis.

Meanwhile, over-the-counter (OTC) trading remained relatively active as yields moved in a choppy pattern in reaction to the market’s liquidity status. We expect the market to remain flat in the days ahead given the general cautious approach by traders; we however anticipate a reversal after the FGN bonds primary market auction scheduled for October 17.

This week, a total of N75.00 billion worth federal government bonds will be issued across different maturities (5y, 7y & 10y). In addition, there will be a meeting of the FAAC. In our opinion, liquidity levels will remain elevated through the week.

In the 2013 appropriation bill presented by the president to the national assembly, Nigeria’s expenditure for the coming fiscal year is estimated at N4.93 trillion. This represents an increase of c.5% over the N4.7 trillion appropriated for the 2012 fiscal year. The proposed budget assumes oil production of 2.53 million barrels per day (bpd) and oil price of US$75 per barrel. The fiscal and domestic borrowing is expected to decline to 2.17% of GDP, from 2.85% in 2012 whilst growth in domestic output is estimated at 6.50%. In addition, recurrent expenditure as a percentage of total expenditure declined to c.69% from c.72% in 2012 while capital expenditure as a share of aggregate spending increased from to c.31% from c.28% in 2012.  

To curb Nigeria’s rising domestic debt, the government will establish a sinking fund of N100 billion in the 2013 fiscal year with the sole objective being to repay Nigeria's maturing debt obligations rather than rolling over. Consequently, in 2013, annual domestic borrowing is estimated at N727 billion compared with N744 billion in 2012 and N852 billion in 2011.

LAST WEEK: The Nigerian Bond Watch @ 080912 – DLM

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