By Oludare Mayowa
LAGOS (Reuters) - Nigeria has raised 160 billion naira ($525 million) in local currency bonds at its second debt auction this year at yields lower than the inflation rate in Africa's biggest economy, the Debt Management Office said on Thursday.
The debt office had initially want to raise 110 billion at the auction but increased the offer due to demand.
Total demand stood at 337.03 billion naira at Wednesday's auction, higher than 235.05 billion naira at its previous sale.
Annual inflation in Nigeria climbed to high of 18.72 percent in January, its 12th straight monthly rise. The trend was worsened by dollar shortages, which have crippled the import-dependent economy and triggered its first recession in 25 years.
The government is also facing funding challenges brought on by the low price of oil. It expects the budget deficit to widen to 2.36 trillion naira this year as it tries to spend its way of out of the recession.
More than half of the deficit will be funded through local borrowings, the government has said.
The debt office said it raised 70 billion naira of the paper maturing in 2036 at 16.77 percent, lower than 16.99 percent same instrument fetched at the previous auction and paid 16.61 percent for the 30 billion naira raised in the paper maturing in 2026 compared to 16.99 percent at the previous auction.
It issued 60 billion naira in the note maturing in 2021 at 16.55 percent against 16.89 percent at the previous auction.
Nigerian government issues local currency bonds every month to raise funds to support its spending plan, which also goes to help the banking system manage liquidity.
(Reporting by Oludare Mayowa; Editing by Toby Chopra)