Nigeria raised N56.05 billion ($179 million) through a bond auction on Wednesday, below the amount on offer. This is because domestic pension funds and insurance companies reduced their orders due to low yields, traders told Reuters on Thursday.

“Pension funds and insurance firms cut back their demand ... because of expectations of higher yields,” a dealer said, adding that the two sectors, which dominate the local bond market, subscribed for just N63.65 billion.

The Debt Management Office (DMO) offered N135 billion worth of bonds maturing in 2021, 2027 and 2037, but sold N9.18 billion of bond maturing in five years, N17.51 billion in 10 years and N29.36 billion in 20 years bonds. DMO raised the 2021 and 2027 bonds at a rate of 16.80% and 16.90% for the 2037 debt. Investors had demanded yields as high as 17% to help boost returns further above inflation, which was 16.1% in June, according to auction results.

The issuing of bonds is part of the government’s strategy to plug its budget deficit for this year. Indeed, due to a plunge in the prices of oil from which Nigeria gets most of its revenues, the country slumped last year into its first recession in 25 years. As a result, a budget deficit of N2.36 trillion was forecast for this year. Due to this, the debt office issues bonds every month.

Anita Fatunji