The Federal Government of Nigeria, through the Debt Management Office (DMO), is seeking to raise N180 billion from the bond market in October 2024.
Nairametrics observed that this is an increase of 20% from the N150 billion offered in the previous month.
This upward revision reflects the government’s continued efforts to finance key projects and manage its fiscal obligations through the bond market.
Breakdown of bond offers
According to the bond offer circular released by the DMO, two re-openings of previously issued bonds are being auctioned.
The first bond is the N90 billion 19.30% FGN APR 2029 (5-year reopening), while the second is the N90 billion 18.50% FGN FEB 2031 (7-year reopening).
Both bonds will be auctioned on October 21, 2024, with settlement set for October 23, 2024.
The units of sale are pegged at N1,000 per unit, with a minimum subscription requirement of N50,001,000.
Investors are required to bid in multiples of N1,000 beyond the minimum threshold. These bonds offer semi-annual interest payments and are structured for bullet repayment at maturity.
The bonds are considered secure investments as they are backed by the full faith and credit of the Federal Government of Nigeria and are charged upon the general assets of Nigeria.
Also, they qualify as securities in which trustees can invest under the Trustee Investment Act and are exempt from taxes for pension funds, among other investors, under the Company Income Tax Act (CITA) and Personal Income Tax Act (PITA).
In addition to these tax benefits, the bonds are listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange.
All FGN Bonds also qualify as liquid assets for banks when calculating liquidity ratios, making them an attractive option for financial institutions.
Interested investors are directed to approach any of the accredited Primary Dealer Market Makers (PDMMs), which include leading financial institutions such as Access Bank Plc, First Bank of Nigeria Ltd, Stanbic IBTC Bank Ltd, Citibank Nigeria Ltd, and others.
What you should know
The Nigerian Federal Government raised N264.527 billion at its September bond auction.
The auction, held on September 23, 2024, reopened three tranches of Federal Government of Nigeria (FGN) bonds: the 19.30% FGN APR 2029 (5-year bond), the 18.50% FGN FEB 2031 (7-year bond), and the 19.89% FGN MAY 2033 (9-year bond).
Total subscriptions were at N414.881 billion in September, and the amount allotted was N264.527 billion.
Despite the lower allotment in September, the results indicate sustained demand, particularly for longer-dated instruments.
Also, in the September bond auction, the marginal rates across all bond tenors were lower compared to the previous month’s rates.
The reduction in the rate suggests that the government was able to secure funding at a slightly lower cost, which could help reduce debt servicing obligations.