.To be due in October 2021, 2022
By Afusat Adeoluwa
The Debt Management Office (DMO) on behalf of the federal government on Monday offered for subscription two-year savings bond at 11.244 per cent and three-year savings bond at 12.244 per cent per annum.
The offer circular obtained from the DMO official website showed that the two-year bond will be due in October 2021 while the three-year bond will be due on October 2022.
Although, the debt office did not state the amount that was offered but added that the maximum subscription was N50 million at N1, 000 per unit, subject to a minimum subscription of N5, 000 and in multiples of N1, 000.
But noted that the bond was fully backed by the full faith and credit of the federal government, with quarterly coupon payments to bondholders.
The federal government often raise money through bonds issuance to help finance the nation’s budget deficit.
For instance, the current administration has disclosed its plans to borrow fresh N4.6 trillion within the next three years, covering 2020 to 2022, to finance its programmes.
Although, financial experts have complained about the increase in Nigeria’s debt servicing as the federal government of Nigeria in the last four years provided a whopping sum of N8.14 trillion as budgets deficit, findings by The Daily Times revealed.
Further checks revealed that the federal government borrowed N1.95trillion to finance the deficit in 2018 budget, but declined further to N1.86trillion in 2019 budget. And again, Africa’s largest economy will run a deficit of N1.70 trillion in the year 2020 fiscal year as Federal Government projected aggregated N7.17 trillion revenue from shares of the Federation Account and Value Added Tax (VAT) as well as other revenues.
Though the projected aggregate revenue for the year 2020 is N170.41 billion or 2.4 per cent more than the N6.99 trillion for 2019 revenue projection, it is N1.95 trillion short of the entire 2020 budget estimated at N9.12 trillion.
This was contained in the Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/ FSP) document forwarded to the Senate by the president recently.
Consequently, the federal government has projected an increase in the nation’s debt servicing from N2.14 trillion in 2019 to about N2.45trillion; Statutory Transfer of N526.46 billion, from N502.1 billion in 2019; and sinking fund of N296 billion, from N110billion.
Minister of Finance, Budget and National Planning Zainab Ahmed had said the 2020 budget, recurrent non-debt the appropriation was put at about N4.57trillion against N4.39 trillion in 2019 Budget.
Although, the nation’s debt profile has been on the rise but the DMO has said there is no cause for alarm as it continues to be sustainable and is well within the threshold of 56 per cent for countries in her peer group.
In its latest circular, the DMO stated that the bond offering would close on Friday, with the intention to also encourage lower-income earners to save, while earning more income (interest), compared to their savings accounts with banks.