DMO reopens ₦450B FGN savings bonds for subscription at auction
In a strategic move to bridge Nigeria’s significant budget deficit, the Debt Management Office (DMO) has announced the re-opening of three Federal Government of Nigeria (FGN) savings bonds worth ₦450 billion. This announcement, made on Thursday in Abuja, marks a significant opportunity for investors and aims to bolster the country’s financial stability amidst economic challenges.
The DMO’s offer details three separate FGN bonds, each valued at ₦150 billion, with varying maturity dates and interest rates designed to attract a diverse range of investors. The bonds are available at ₦1,000 per unit, with a minimum subscription requirement set at ₦50 million and subsequent investments in multiples of ₦1,000.
Breakdown of the Bond Offers
1. April 2029 FGN Bond:
– Value: ₦150 billion
– Interest Rate: 19.30% per annum
– Term: Five-year re-opening
2. February 2031 FGN Bond:
– Value: ₦150 billion
– Interest Rate: 19.50% per annum
– Term: Seven-year re-opening
3. May 2033 FGN Bond:
– Value: ₦150 billion
– Interest Rate: 19.89% per annum
– Term: Nine-year re-opening
Auction and Settlement Details
The DMO has scheduled the auction date for June 14, with the settlement date set for June 26. These bonds offer semi-annual interest payments, providing a steady income stream for investors. The principal sum will be repaid in full on the respective maturity dates.
“For re-openings of previously issued bonds, successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus any accrued interest on the instrument,” the DMO clarified.
Investor Benefits and Security
The DMO emphasized that FGN bonds are fully backed by the faith and credit of the Federal Government and are charged upon Nigeria’s general assets. These bonds qualify as securities in which trustees can invest under the Trustees Investment Act, providing a secure investment vehicle for a wide range of investors, including pension funds.
Additionally, these bonds are classified as government securities under the Company Income Tax Act and Personal Income Tax Act, offering tax exemptions for pension funds and other investors. They are also listed on the Nigerian Exchange Limited and FMDQ ODC Securities Exchange, enhancing their liquidity and accessibility.
Impact on Banks and Liquidity
FGN bonds are recognized as liquid assets for liquidity ratio calculations for banks, further integrating these instruments into the financial system and ensuring their viability and attractiveness to institutional investors.
Bridging the Budget Deficit
The News Agency of Nigeria (NAN) reports that this ₦450 billion bond offer is a critical component of the government’s borrowing plan aimed at addressing the ₦9 trillion deficit in the 2024 budget. This deficit, a significant challenge for Nigeria’s economy, necessitates innovative financial strategies and robust investor engagement.
By re-opening these bonds, the DMO not only provides a secure investment option but also mobilizes domestic resources to support national development and fiscal stability. The attractive interest rates and structured repayment terms are designed to meet the needs of diverse investor groups, from large financial institutions to individual high-net-worth investors.
