The Federal Government of Nigeria, through the Debt Management Office (DMO), has officially launched the subscription window for the Federal Government Savings Bonds (FGN Savings Bonds) for December 2024.
This initiative, aimed at fostering national investment, invites both individual and institutional investors to partake in the opportunity over a four-day period, from December 2 to December 6, 2024.
This month’s bond offering includes two options: a two-year savings bond maturing on December 11, 2026, with an interest rate of 17.483%, and a three-year bond maturing on December 11, 2027, offering 18.483%.
Each bond unit is priced at N1,000, with a minimum subscription of N5,000 and additional investments in multiples of N1,000, allowing investors to subscribe for up to N50 million.
The settlement date for successful subscriptions is set for December 11, 2024, after which investors can expect their first quarterly coupon payment on March 11, 2025, followed by subsequent payments on June 11, September 11, and December 11 each year.
This offering gives Nigerians the opportunity to invest in government-backed bonds, contributing to personal and national financial stability.
Increased interest rates
The 18.48% interest rate offered on the current Federal Government of Nigeria (FGN) savings bonds represents a notable increase compared to rates from the previous year.
In December 2023, the interest rate for a similar offering was 13.28%, showing a sharp rise of 5.20 percentage points over the past year.
This increase is likely driven by the Central Bank of Nigeria’s (CBN) series of interest rate hikes since February 2024.
- The CBN’s strategy to address inflation and stabilize the foreign exchange market has made Nigerian bonds more attractive, particularly to foreign portfolio investors (FPIs) looking for higher yields.
- Most recently, the CBN raised its benchmark interest rate by 0.25%, from 27.25% to 27.50%, as part of efforts to control rising inflation.
- This decision, which was unanimously supported by the Monetary Policy Committee, continues the trend of increasing interest rates.
- The rise in interest rates is expected to make the FGN savings bond more attractive, drawing interest from both local and international investors looking for stable returns in a high-yield market.
Results from the November FGN bond auction:
- In November, the Federal Government of Nigeria raised N369.59 billion through its FGN bond auction, reflecting strong demand for long-term securities. The auction included two bond options with 5-year and 7-year maturities.
- Among the two, the 7-year bond emerged as the clear favourite, attracting a remarkable subscription of N294.02 billion, well beyond the initial offer of N60 billion.
- The oversubscription reflects strong investor confidence and interest in longer-term investments, with N282.62 billion allotted at a marginal rate of 22.00%.
- Meanwhile, the 5-year bond also generated significant interest, with total subscriptions reaching N75.56 billion.
This robust participation highlights the growing preference for secure, government-backed investment options as investors navigate the evolving economic landscape.