The Debt Management Office (DMO) has announced its intention to sell a total of N2.5 trillion worth of Federal Government of Nigeria (FGN) bonds to retail investors this month.
According to a publication by the DMO, the offering is divided into two tranches: N1.25 trillion for a 7-year tenure and another N1.25 trillion for a 10-year tenure.
Subscription and Settlement Dates Interested investors can subscribe to the bonds starting from February 19, 2024, with the settlement date scheduled for February 21, 2024.
Maturity Dates The 7-year bond is slated to mature in February 2031, while the 10-year bond is set to mature in February 2034.
Unit of Sale and Minimum Subscription Requirement Investors can purchase the bonds at a unit price of N1,000, with a minimum subscription requirement of N50,001,000. Subsequent increments are to be made in multiples of N1,000.
Interest Rate and Payment The DMO disclosed that interest will be paid semi-annually, and successful bidders will receive any accrued interest on previously opened offers.
Regarding re-openings of previously issued bonds, where the coupon rate is already set, successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, along with any accrued interest on the instrument.
Federal Government Debt Strategy FGN savings bonds form a crucial part of the federal government’s domestic borrowing plan. In 2023, the government raised approximately N7.04 trillion in domestic borrowing through the DMO, with around N5.49 trillion coming from FGN bonds to finance the 2023 budget.
For 2024, the federal government projects new borrowings to amount to N7.83 trillion. President Tinubu has already submitted a request to the National Assembly to approve approximately $8.69 billion and €100 million as part of the external borrowing plan for 2022 to 2024.
Characteristics of FGN Bonds FGN bonds meet the criteria outlined in the Trustee Investment Act, making them eligible for trustees to invest in. Additionally, they qualify as Government securities under the Company Income Tax Act (CITA) and Personal Income Tax Act (PITA), ensuring they are tax-exempt for Pension Funds and other investors.
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