In August 2024, the Federal Government of Nigeria intends to raise N190 billion from the bond market through the Debt Management Office (DMO).
This offer amount is 37% less than the N300 billion issued last month, making it the lowest bond offer made in 2024.
On August 19, 2024, the bond offer will be held through auction. There will be three distinct re-openings, each with a different interest rate and maturity date, giving prospective investors a range of possibilities.
Dissection of the bond offer
The DMO plans to reopen three previously issued bonds as part of its plan to raise N190 billion from the bond market, according to the August 2024 FGN Bond Offer Circular.
These bonds, which were first issued in previous years, are being made available to investors once more with enticing terms intended to encourage significant participation.
Among the bonds is the N70 billion reopening of the 5-year, 19.30% FGN APR 2029 bond, which matures in April 2029.
Additionally, the DMO is providing an additional N70 billion via the 7-year, 18.50% FGN FEB 2031 bond, which matures in February 2031.
The 19.89% FGN MAY 2033, a 9-year bond with a face value of N50 billion and a maturity date of May 2033, is the third bond in the sale.
The government gave less for the longer-tenor bond despite previous bond auctions showing a change in investor preferences towards higher-yielding and longer-tenor bonds against a backdrop of cautious market mood.
Due to their attractive interest rates, these bonds are anticipated to get a lot of attention from investors in the Nigerian bond market who are seeking steady, long-term returns.
The minimum subscription for these bonds, which are being sold in units of N1,000, is N50,001,000, with further increments in multiples of N1,000.
What to note
Semi-annual interest payments will be made on the bonds, with a bullet repayment plan in place for when they mature. Their appeal to a broad spectrum of investors is strengthened by the fact that they are fully secured by the national assets of the nation and fully backed by the full faith and credit of the Federal Government of Nigeria.
The bonds would be listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange following the DMO-conducted auction on August 19, 2024, with a settlement date of August 21, 2024.
Under the Trustee Investment Act, these bonds are also acceptable securities for trustees to invest in. Pension funds and other institutional investors find them appealing since they are also recognized as government securities under the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA), which exempts them from some taxes.
In 2024, the government made a somewhat smaller offer of N190 billion than in prior years, which was a prudent move given the bonds’ waning demand.
Raising a significant amount of money to support the government’s fiscal policies and infrastructure development is the main goal of this bond offering.
The FGN hopes to increase the amount of money coming into the nation’s economy by attracting both domestic and foreign investors with the issuance of these bonds.
These monies are essential for supporting important projects in the fields of power, healthcare, education, and transportation.
Furthermore, by lowering the government’s reliance on external borrowing – which frequently carries stricter terms and higher interest rates – the raised cash will assist the government in meeting its financial obligations.
