FG Aims to Raise N150bn from Bond Market in September 2024

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The federal government, via the Debt Management Office (DMO), plans to raise N150 billion from the bond market this September. T

 

This bond issuance is part of the government’s strategy to bridge its budget deficit. Scheduled for auction on September 23, 2024, this offering marks one of the smallest bond issues of the year, approximately 21% lower than the amount offered in August.

 

The upcoming bonds include re-openings of previously issued instruments: a N70 billion tranche of the 19.30% FGN APR 2029 (5-year bond), a N50 billion tranche of the 18.50% FGN FEB 2031 (7-year bond), and a N30 billion tranche of the 19.89% FGN MAY 2033 (9-year bond).

 

While the total offering of N150 billion is smaller than previous years, it reflects a cautious borrowing approach amid financial needs and weakening market demand.

 

The bonds will be sold in units of N1,000 each, with a minimum subscription of N50,001,000, aimed at attracting institutional investors like pension funds and insurance companies, though high-net-worth individuals can also participate.

 

The bonds offer competitive interest rates, with coupon payments of 19.30%, 18.50%, and 19.89% for the respective maturities, making them appealing to yield-seeking investors. With maturity periods of 5, 7, and 9 years, these bonds cater to medium- to long-term investment strategies.

 

The settlement date for the Federal Government of Nigeria’s bond auction is set for September 25, 2024, marking when successful bidders will make payments for the bonds they acquire and receive their bond certificates.

 

Investors will benefit from semi-annual interest payments, with principal repayment scheduled at maturity. These bonds are fully backed by the Nigerian government’s credit and secured upon the nation’s general assets, enhancing their attractiveness to a diverse range of investors.

 

Additionally, the bonds are listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange, providing liquidity through potential secondary market trading. They qualify as securities for trustees under the Trustee Investment Act and are classified as liquid assets for banks under liquidity ratio requirements.

 

One significant advantage of investing in FGN bonds is the tax exemption under Nigerian law. These bonds are recognized as government securities under both the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA), allowing pension funds and other tax-exempt investors to earn interest without incurring taxes.

 

This feature adds further appeal, particularly for institutional investors seeking tax-efficient options.

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