DMO Unveils October FGN Savings Bonds Offering up to 18.084% Interest Rate

The Federal Government of Nigeria, through the Debt Management Office (DMO), has officially opened the subscription window for the October 2024 Federal Government of Nigeria (FGN) savings bonds.

This opportunity, which runs from October 7 to October 11, 2024, offers investors attractive interest rates, with the potential for returns reaching up to 18.084 per cent.

The bond offerings include a two-year savings bond maturing on October 16, 2026, with a 17.084 per cent interest rate, and a three-year savings bond maturing on October 16, 2027, offering the higher rate of 18.084 per cent.

Each bond unit is priced at N1,000, with a minimum subscription of N5,000 and additional investments accepted in multiples of N1,000. Investors can subscribe with a maximum investment of N50 million, with interest payments made quarterly.

Upon completion of the subscription phase, settlement is planned for October 16, 2024. Investors who participate will receive their quarterly coupon payments on January 16, April 16, July 16, and October 16 each year.

The interest rate of 18.084 per cent marks a significant increase compared to rates from the previous year; in October 2023, the interest rate for a similar offering was 12.074 per cent, representing a sharp increase of 6.01 percentage points over one year.

This rise in interest rates is largely attributed to the monetary policies adopted by the Central Bank of Nigeria (CBN), which has been raising interest rates since February 2024.

The CBN’s strategy includes increasing interest rates to combat inflation and stabilize the foreign exchange market, making Nigerian bonds more attractive to foreign portfolio investors (FPIs) seeking higher yields.

Recently, the CBN surprised market observers by raising its benchmark interest rate by an additional 50 basis points to 27.25%. Furthermore, the Cash Reserve Ratio (CRR) was increased by 500 basis points to 50% for commercial banks, while the CRR for merchant banks rose by 200 basis points to 16%.

These actions have created a favorable environment for the FGN savings bond offer, drawing substantial interest from both domestic and foreign investors. In a related development, the Federal Government of Nigeria successfully raised N414.88 billion through its FGN bond auction in August, reflecting strong demand among investors for longer-term securities.

The auction included three separate bonds with varying maturities—5 years, 7 years, and 9 years—with the 9-year bond proving to be the most appealing, attracting a substantial subscription volume of N337.34 billion, far exceeding the initial offering of N30 billion.

Overall, the latest savings bonds offer presents a lucrative investment opportunity amid an evolving financial landscape, allowing investors to benefit from attractive interest rates while contributing to Nigeria’s economic growth.