Over four months, the Federal Government has garnered a cumulative sum of N11 trillion through auctions and sales of Treasury bills and savings bonds issuance.
An examination of bonds and bills outcomes for the current year, as reported by the Central Bank of Nigeria, CBN, and the Debt Management Office, DMO, reveals that the government secured N3.1 trillion in FGN bonds and N7.92 trillion in T-bills between January and April 2024, amounting to a total of N11.2 trillion.
These bonds, integral to the government’s debt management strategy, serve various purposes, including offering investors a relatively secure investment avenue, aiding in the administration of the country’s debt profile, and facilitating efficient fund management.
Specifically, treasury bills and FGN bonds are deemed risk-free, theoretically posing zero risk, as the government is assumed to consistently honor its debts. In case of default, the government can resort to printing money to meet its obligations.
In January 2024, the Federal Government raised approximately N418.197 billion from four bonds auctioned before realizing N1.49 trillion from two FGN bond offers issued by the DMO in February, falling slightly below the N2.5 trillion target.
In March 2024, the DMO raised about N475.67 billion in its March bond option, taking advantage of the prevailing upward trend in rates, while also disclosing that the Federal Government raised N626.8 billion in its April 2024 FGN bond auction.
The latter amount represents a 32 percent increase over the N475.67 billion raised in the March auction, signaling robust market confidence in the government’s creditworthiness.
For T-bills, a total of N1 trillion was on offer, but investor demand surged to N2.3 trillion in January. The one-year bill, with an offer of N600 billion, attracted a massive subscription of N1.8 trillion, of which the central bank sold N908.7 billion.
In March 2024, the DMO sold bills valued at N2.69 trillion across its auctions, marking an increase of N11 billion compared to the value of T-bills sold across auctions in February 2024 (N2.589 trillion).
The CBN held a successful T-Bills auction on April 24, 2024, raising approximately N362.45 billion across various maturities. This outcome underscores the market’s strong appetite for government securities.
This fundraising effort coincides with the government’s plans to address the 2024 budget deficit of N9.18 trillion and settle debts to repay the Ways and Means Advances.
To address this, the government earmarked approximately N4.83 trillion from the proceeds of Nigerian Treasury Bills and Bonds issued in 2024, as stated by the Minister of Finance, Wale Edun.
Sheriffdeen Tella, a professor of Economics, has lauded bonds and treasury bills as effective means to raise funds while reducing foreign debts. He highlighted that these fixed-income securities serve a dual role in raising funds for the government and absorbing excess liquidity in the system.
“Bonds and treasury bills are instruments of borrowing by the government because when the government floats its bond, people, organizations, and investors buy into it and that reduces the money supply. So, bonds and treasury bills play two roles: The role of raising funds for the government and the role of mopping up liquidity in the system,” he said.
“Nigerians can earn more via the interest rate paid on these instruments. The bonds can be paid after a minimum of two years while treasury bills can be three months, that is 91 days, six months, and a maximum of one year and that is a shorter option. The CBN normally uses that to raise short-term funds for the government and to mop liquidity to reduce money supply,” he added.
Despite the substantial funds raised by the government through these avenues, experts propose that Nigerians could generate more funds through enhanced promotion of financial literacy.
Tajudeen Ibrahim, the Director of Research and Strategy at Chapel Hill Denham, noted that many Nigerians fail to capitalize on treasury bills and bonds as investment options due to limited financial knowledge.
He suggested that the government could boost funding by prioritizing efforts to enhance public awareness of financial literacy and investment prospects.
He said, “Let me start by saying that Nigeria is one country where financial literacy is still low. So in a country where financial literacy is low, you should not be surprised that many Nigerians are not taking advantage of treasury bills and bonds as an investment opportunity. So, it is true that many Nigerians don’t and there is no way you can know how to do it if you are not financially knowledgeable.
“Secondly, the supervising authorities like the CBN and the DMO of these securities have always tried to educate the public by advertising or creating a notice on the T-bills to be issued and interested investors should bid. But it is difficult for someone to identify them if they are not financially knowledgeable and that is the problem. How many Nigerians are aware of the FGN saving bonds? Nigerians do invest but the reality is that Nigerians who are not aware of it are a lot more than those who are aware of it and invest in it.”
He added, “Every month, the government comes to the market to raise these funds. Portfolio managers, banks, insurance companies, and other corporate investors are savvy about these things. They follow it and get updates. They ask about it. So it is not a problem of institutions but a problem of individuals and financial illiteracy and that has to improve over time.”
Explaining the registration process, the economist explained that interested individuals could open an investment account with their preferred portfolio investors, financial institutions, or insurance companies, and then provide instructions for investment in profitable bonds based on observed data and analysis.
“Interested Nigerians have to go through their financial advisers, they can go through investment management businesses. When they open an account with such investment businesses, they will deposit money in their investment account and then they can give their assets management company instruction to invest in treasury or saving bond bills for them and other investment securities that are available to which they are eligible to invest.
“Our company is one of such management organizations that can handle it. They will onboard them as customers and then begin to invest in them. They will also offer investment advice to them. Nigerians are of different ages and your age determines your risk appetite so we expect older citizens to have a low-risk appetite and younger ones to have a high-risk appetite. Investing in bonds and treasury bills is a lot more beneficial than keeping their money in a savings account and is highly more rewarding.”
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