The Debt Management Office (DMO) of the Federal Government of Nigeria (FGN) has announced an auction subscription offer to raise N350 billion by issuing Federal Government Bonds.
This sum is less than the N450 billion offered at the January 2025 FGN bond sale the month before.
The auction, which is set for February 24, 2025, will focus on the reopening of two previously issued bonds.
The offer size for the 19.30% FGN April 2029 bond is N200 billion, and the offer amount for the 18.50% FGN February 2031 bond is N150 billion. The winning bids will be settled on February 26, 2025.
The government’s continuous plan to raise long-term cash to support national spending and promote economic growth includes this issuance.
The government effectively manages its debt commitments by reopening these bonds, giving investors another chance to invest in a safe and well-structured vehicle.
Provider Information And Terms Of Subscription
- The bonds have a minimum subscription requirement of N50,001,000, and future investments must be made in multiples of N1,000. The bonds are being offered in increments of N1,000. The coupon rates are fixed at 19.30% for the 5-year bond maturing in April 2029 and 18.50% for the 7-year bond maturing in February 2031 because these are reopenings of existing bonds.
- However, the yield-to-maturity offer that clears the auction volume will determine the actual price paid by winning bidders. Investors must also pay any interest that has accumulated on the bonds between the last coupon payment date and the settlement date.
- Both bonds will include semi-annual interest payments, guaranteeing investors consistent returns during the bonds’ duration. Investors will get the entire face value of their bond investments at maturity rather than in installments, as the principal will be paid back in full through a bullet payback.
Benefits And Security For Investors
Because the bonds are considered government securities under Nigerian tax laws, many investors find them appealing. These bonds qualify for tax deductions for pension funds and other eligible institutional investors under the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA).
The appeal of FGN Bonds is increased by this tax benefit, especially for long-term investors looking for steady returns with low tax obligations.
- The bonds qualify as securities in which trustees can invest under the Trustee Investment Act, in addition to their tax advantages.
- Because of this classification, institutional investors such as insurance companies and pension funds can deploy funds to these securities with assurance that they will be secure.
- All FGN bonds are considered liquid assets for the banking sector, meaning that commercial banks can use them to meet regulatory liquidity requirements, strengthen their balance sheets, and earn interest income.
- Additionally, the bonds are backed by the full faith and credit of the Federal Government of Nigeria and secured against the nation’s general assets.
- The bonds are listed on the Nigerian Exchange Limited (NGX) and the FMDQ OTC Securities Exchange, offering liquidity for investors who may want to trade their holdings in the secondary market.
Because the government must honour debt repayment and interest payments upon maturity, this support guarantees that investors suffer little credit risk.
Any of the Primary Dealer Market Makers (PDMMs) that the DMO has approved can be used by investors who wish to bid on this bond auction.
Access Bank, First Bank of Nigeria, Stanbic IBTC Bank, Citibank Nigeria, Guarantee Trust Bank, Zenith Bank, and numerous more significant financial institutions are among them.
By serving as middlemen, these organizations make it easier for investors to participate in the auction process.
