Nigeria’s $500 million domestic dollar bond offering is set to close its subscription period today, Friday, with the settlement date scheduled for September 6, 2024.
The Federal Government of Nigeria issued the domestic dollar bond for subscription on August 19, 2024, with a 9.75% per annum interest rate.
Set to mature in 2029, the auction for this bond has been opened and it is expected to close today, August 30, 2024.
Details of the Bond Offering
This bond issuance marks a significant step in Nigeria’s financial strategy, providing an opportunity for investors both within and outside the country.
The bond is structured as a five-year investment, with coupon payments made semi-annually.
Investors can purchase units at a minimum of $1,000 each, with an initial minimum subscription set at $10,000 (10 units). Subsequent investments can be made in multiples of $1,000.
The redemption of the bond will occur through a bullet repayment at the end of the five-year term, ensuring that investors receive their principal in full upon maturity.
The bond is open to a wide range of investors, including Nigerian residents, individuals with savings abroad, members of the Nigerian diaspora, and Qualified Institutional Investors.
The bond qualifies as a security under several legal frameworks, including the Trustee Investment Act and the Pension Reform Act, allowing trustees and Pension Fund Administrators to invest in it.
Additionally, it qualifies as a government security under the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA), offering tax exemption benefits for pension funds.
This bond is part of the government’s broader strategy to tap into domestic and diaspora investments, providing a secure and attractive investment vehicle with the backing of the full faith and credit of the Federal Government of Nigeria.
The bond will be listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange Limited, enhancing its liquidity and accessibility for investors.
United Capital Plc is the lead issuing house and coordinator, with Meristem Capital Limited, Stanbic IBTC Capital Limited, and Vetiva Advisory Services Limited also serving as issuing houses.
The bond is further supported by a network of primary dealer market makers and receiving banks, including Access Bank Plc, Citibank Nigeria Ltd., and Guaranty Trust Bank Ltd., among others.
What you should know
The bond is the latest in a series of external borrowings that the government has embarked on to shore up its foreign reserves, finance key infrastructural projects, and meet budgetary needs.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, earlier said that the $500 million domestic dollar bond will enhance external reserves and help stabilize the foreign exchange situation in the country.
The Nigerian government hopes to double its offer amount as it targets $1 billion in subscriptions through this bond auction.
Nairametrics earlier reported that the Federal Government of Nigeria disclosed the need for specific identification requirements for its latest financial instrument, the Domestic FGN US Dollar Bond.
According to a Frequent Asked Questions (FAQ) document provided by the Debt Management Office (DMO) on its website, all Nigerian citizens, including those residing abroad, must possess a Bank Verification Number (BVN) and a National Identification Number (NIN) to subscribe to the domestic dollar bond.
The FAQ from the DMO also clarifies that subscriptions to the Domestic FGN US Dollar Bond cannot be made by cash.
Instead, all payments must be made through electronic transfers into designated accounts.