Nigeria Sells $698 Million at Bond Sale

lamido-sanusiNigeria sold the largest amount of bonds in at least five months at a sale where demand outstripped supply as Nigerian banks seek to invest in “partially risk- free” assets, Source Capital Nigeria Ltd. said.

The West African nation sold 105 billion naira ($698 million) of bonds at its monthly sale yesterday, the Abuja-based Debt Management Office said on its website today. That’s the most since at least March, data from the website show.

“It is partially risk-free buying bonds, so banks are looking for such risk-free avenues,” Kweku Brown, an analyst at Lagos-based Source Capital, said by phone today. “The financial crisis they faced last year makes it imperative for them to become cautious with their money. So long as liquidity is high, the sale of bonds will continue to rise.”

The Central Bank of Nigeria last year dismissed chief executive officers of eight lenders that gave out non-performing loans totaling 700 billion naira ($4.7 billion), and used 620 billion naira to bail the banks out.

Nigeria expects to clear $10 billion of lenders’ toxic debts and purchases of this debt through state-owned Asset Management Corp. of Nigeria, or Amcon, will cost “roughly” $5 billion, central bank Governor Lamido Sanusi said July 1. Amcon will be funded through government-guaranteed bonds, he said.

Nigeria, Africa’s biggest oil producer, plans to sell 867.5 billion naira of bonds this year to fund its budget deficit, Abraham Nwankwo, director-general of the DMO, said on Feb. 12. That’s the most since at least the three months through June last year, data from the website show.

The nation sold 35 billion naira of three-year bonds at a marginal rate of 7.48 percent, 35 billion naira of five-year securities at 8.85 percent and an equal amount of 20-year bonds at a marginal rate of 10 percent at yesterday’s auction. Three- year bonds were 2.1 times oversubscribed, while demand outstripped supply on the five-year securities 1.8 times. The 20-year bonds were 2.1 times oversubscribed.

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