THE RETURNING FOREIGN FI INVESTOR

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Data in the CBN’s Quarterly Statistical Bulletin for Q4 2017, sourced from the Debt Management Office (DMO), show that the largest category of holders of FGN domestic debt was the non-bank public, which had a 43.2% share.

This group would include the pension funds and other institutional investors, government agencies, retail players and the offshore community. The domestic money banks (DMBs) had a 42.3% holding. Over a 12-month period, the share of the non-bank public declined by seven percentage points (pps), and that of the DMBs rose by eight pps.

  • Turning from the stock of the domestic debt to the flows, we have seen a breakdown of the allotment of FGN bonds at the DMO’s monthly auctions for September through to December 2017. The DMBs accounted for 27.1% of the allotment in the period, fund managers and NBFIs 26.6%, foreign investors 22.7% and pension funds 12.6%.
  • The offshore community’s share is high but we should recall that these investors only really returned to the market in August/September. They had observed the CBN’s fx reforms earlier in the year but moved in response to a change in its market strategy as well as to the FGN’s new debt strategy of externalization.
  • The pension funds’ share (of the total allotment of N539bn) appears low, amounting to N68bn. It may be significant that over the period the DMO only once offered the long bond, regularly said to be the PFAs’ favorite.

Sources: CBN; FBNQuest Capital Research
  • The core point for the DMO, acting on behalf of the FGN, is always whether it can meet its funding target for domestic issuance. In its favor are (Good Morning Nigeria, 27 April 2018): the indications that that target will be reduced this year (not that we have an approved budget); the offshore community is on board: and the DMO now has other debt instruments to sell.
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