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AfricaJuly 3 2007

Bond markets walk tall

Primary and secondary Nigerian government bond markets are undergoing structural change with bond indices serving as economic benchmarks. Nick Kochan and Dapo Olagunjo explain.
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The resurgence in Nigeria’s domestic sovereign debt instruments dates back to 2000, when the Debt Management Office (DMO) was created to co-ordinate the management of Nigeria’s debt. This was previously performed by several organisations, and the result was disorganised and inefficient. For example, most of Nigeria’s domestic debt instruments were structured into treasury bills with maturities of 91 days and below, creating inconsistencies and irregularities in the federal government’s borrowing costs.

In October 2003, the DMO introduced the sale of Federal Government of Nigeria Bonds. This has affected the markets and investor behaviour in three ways: first, it has restructured Nigeria’s deficit funding from shorter to longer tenored borrowing instruments; second, it has improved and lengthened the yield curve in the domestic money markets; and third, it has encouraged long-term savings.

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