AS the unexpected moderation in July inflation figures stimulated demand in the local bond market from Wednesday to Friday last week, there are expectations that expected liquidity inflows will help moderate interbank rates.
The stimulated demand, according to dealers, overshadowed the quiet sentiment earlier in the week.
Hence, the market closed bullish, with the average benchmark declining by 205 basis points (bps) to 19.32 percent from 19.82 percent.
“In the coming week, barring excess Cash Reserve Ration (CRR) deduction by the apex bank, we estimate a net inflow of N508.0 billion due to offsetting impact of inflows from paper maturities (N741.0 billion) and coupon payment (N366.5 billion) overestimated outflows from scheduled Primary Market Auction (Bonds: N190.0 billion, NT-Bills: N410.0 billion).
“In the secondary market, activity would likely be muted ahead of the auction while buy interest from lost bids should spur interest at the end of the week,” analysts from Afrinvest (West) Africa Limited observed.
The liquidity inflows will majorly come from the Federation Accounts Allocation Committee (FAAC) which shared N1.358 trillion among the Federal Government, states and local government councils (LGCs) for July.
This is contained in a communiqué issued after the meeting for August on Friday in Abuja.
According to the communiqué, the N1.358 trillion total distributable fund comprised statutory revenue of N161.593 billion.
It also comprised Value Added Tax (VAT) revenue of N582.307 billion and Electronic Money Transfer Levy (EMTL) revenue of N18.818 billion.
Also included in the total distributable revenue is the Exchange Difference revenue of N581.710 billion and solid mineral revenue of N13.647 billion.
The communiqué stated that a total revenue of N2.613 trillion was available in the month of July.
According to the communiqué, gross statutory revenue of N1.387 trillion was received for the month of July.
“This was lower than the sum of N1.432 trillion received in the month of June by N45.517 billion,” it said.
It said that gross revenue of N625.329 billion was available from VAT in July, adding that it was higher than the N562.685 billion available in the month of June by N62.644 billion.
“From the N1.358 trillion total distributable revenue, the Federal Government received the total sum of N431.079 billion and the state government received N473.477 billion.
“The LGCs received N343.703 billion and a total sum of N109.816 billion (13 percent of mineral revenue) was shared to the benefiting states as derivation revenue,” it said.
It said that of the N161.593 billion statutory revenue, the Federal Government received N58.545 billion and the state governments received N29.695 billion.
It added that the LGCs received N22.894 billion, while N50.459 billion (13 percent of mineral revenue) was shared to the benefiting states as derivation revenue.
Meanwhile, the Nigerian Debt Management Office (DMO) has revealed plans to auction N190 billion in reopened bonds this week.
The debt office has so far raised N4.3 trillion from government bonds sales in the capital market in 2024, accounting for 70 percent of its borrowing plan to finance budget deficit for the year.
The debt agency is expected to conduct its monthly primary market auction, where it will offer investors N190 billion worth of government bonds.
This is in contrast with the past issuance offer size of N300 billion each month, suggesting the supply side is already slowing down ramping up funds from the primary markets auctions.
Details of the scheduled auction showed that DMO would offer a five-year re-opening bond worth N70 billion to investors. Also, a seven-year re-opening bond of the same amount will also require a subscription.
DMO will also re-open a nine-year bond worth N50 billion. The secondary market recorded a yield surge to 20 percent at the beginning as a result of sell-side activities amidst economic uncertainties and inflation conditions.
In July, DMO only allotted N225.72 billion despite offering N300.00 billion worth of bonds. The total subscription was N279.67 billion.
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