Nigeria: DMO comfortably raised US$350

Nigerian Debt Management Office held its latest monthly auction of FGN bonds on Wednesday and comfortably raised its target of N70bn (US$350m). The total bid of N186bn was the highest since July 2014 and a sharp increase on the previous month’s N116bn. Local institutional buying picked up on the positive momentum generated by the elections. The offshore community also made an appearance: some players may have re-entered the market, having seen the theory of a third devaluation after the elections overtaken by events. The cut-off point (stop rate) for the same three debt issues was about 200 bps lower along the curve than at the auction in March.

In the absence of a sustained recovery in the oil price to underpin the public finances, we assume that investors are buying into talk of much tighter fiscal management under a Buhari administration.

We can all identify areas where the management could be tightened: tax exemptions, duty waivers, inflows from the oil industry, allowances for officials, and ineffective ministries, departments and agencies (MDAs), to name but five.

If there is to be fiscal transformation, it will come in stages. Members of the circle around the president-elect have sought to manage expectations and indicated that Nigerians may not see sizeable changes until October. The 2015 budget process, almost concluded, limits their room for manoeuvre.