The Debt Management Office (DMO), acting on behalf of the Federal Government of Nigeria (FGN), has recently conducted an auction for the subscription of four FGN bonds valued at a total of N360 billion for the month of August 2023.
As outlined in the offer circular released by the DMO on Thursday, the first bond on offer is an April 2029 FGN bond, with a value of N90 billion and an interest rate of 14.55 percent per annum.
This particular bond constitutes a 10-year re-opening of the existing issue. Similarly, the second bond available for subscription is a June 2033 FGN bond, also valued at N90 billion, and carrying an interest rate of 14.70 percent per annum, serving as a 10-year reopening.
Furthermore, the DMO has presented a June 2038 FGN bond, valued at N90 billion, with an interest rate of 15.45 percent per annum. This bond represents a 15-year reopening of a previous issuance.
The last offering is the June 2053 FGN bond, also valued at N90 billion, and featuring an interest rate of 15.70 percent per annum. This bond represents a 30-year reopening of the original issuance.
“They qualify as securities in which trustees can invest under the Trustee Investment Act
“They qualify as government securities within the meaning of the Company Income Tax Act and Personal Income Tax Act for tax exemption for pension funds amongst other investors.
“They are listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange.
“All FGN bonds qualify as liquid assets for liquidity ratio calculation for banks,” the DMO said.
All of the mentioned FGN bonds are available for subscription at a unit cost of N1,000, with a minimum subscription requirement of N50 million and subsequent subscriptions in multiples of N1,000.
For bonds that are re-openings of previously issued bonds with fixed coupons, bidders are expected to pay a price corresponding to the yield-to-maturity bid that successfully clears the auction volume, along with any accrued interest on the instrument.
Interest on these bonds is paid semi-annually, and the principal repayment is set as a bullet payment due on the maturity date. It’s noteworthy that FGN bonds enjoy the full backing of the Federal Government’s faith and credit, with their security secured by the general assets of Nigeria.
These FGN bonds have multiple benefits, including qualification as securities in which trustees can invest under the Trustee Investment Act. They also fall under the category of government securities in accordance with the Company Income Tax Act and Personal Income Tax Act, qualifying for tax exemptions for pension funds and other investors.
Additionally, these bonds are listed on both the Nigerian Exchange Limited and the FMDQ OTC Securities Exchange. Furthermore, all FGN bonds are considered liquid assets for the calculation of liquidity ratios for banks.
The DMO’s auction of these FGN bonds reflects the government’s continued efforts to manage its debt and financial obligations while providing investment opportunities for both institutional and retail investors.
