Nigeria's $500m Domestic Dollar Bond Offers 9.7% Yield to Investors

Investors in the Series I $500 million Domestic FGN US Dollar Bond will get 9.7 per cent yields, according to the guidelines for the offer which opened yesterday.

A five-year bond, with bi-annual interest payment in the currency of issuance, the first-of-its-kind domestic issuance carries a coupon or interest rate of 9.75 per cent.

Nigeria’s three and five year tenor Eurobond currently yield between 9.662 per cent and 10.03 per cent, thus the mid-point pricing of 9.75 per cent is considered attractive.

The bond is scheduled to close on August 30, with settlement on September 6.

The minimum subscription is 10 units or $10,000, with additional investments in multiples of one unit or $1,000 thereafter.

Redemption shall be through bullet repayment on the maturity date.

The bond is open for subscription to all Nigerian residents, citizens with savings abroad, those in the diaspora, qualified institutional investors and other groups of investors.

Qualified institutional investors include banks, cooperative societies, fund managers, pension fund administrators, insurance companies, government agencies, staff schemes, non-bank financial institutions, trustees, custodians, investment/unit trusts, stockbrokers and market makers.

Under the rules, payment is expected to be made within 24 hours upon receipt of the allocation confirmation notice, with subscribers responsible for applicable transfer charges.

Besides the interest rate of 9.75 per cent per annum, the $500 million bond also qualifies for tax exemption for pension funds and other investors.

It has also been granted liquid assets status by the Central Bank of Nigeria (CBN), implying that banks can use such investments in the calculation of their liquidity ratio (LR).

Trustees and pension fund administrators can also invest in the bond. It is considered as risk-free with the sovereignty and credit of Nigeria as a guarantee.

The bond’s structure allows the government to absorb oversubscriptions within the limit of the programme’s total size of $2 billion.