FG opens 2023 borrowings with two savings bonds

The Federal Government will today open application list for its first debt issuance in 2023 with the launch of two tranches of its monthly retail bond issuance, otherwise known as Federal Government of Nigeria Savings Bond (FGNSB).

The Debt Management Office (DMO), which oversees government’s debt issuance and management, is offering two tranches of FGNSBs with two-year and three-year tenors. The January 2023 issuance is the 67th tranche of the savings bond, introduced in 2017.

The government is offering the two-year sovereign retail bond at a coupon of 9.600 per cent per annum, 21.7 per cent below the 12.255 per cent offered on similar bond in December 2022.

It is also simultaneously offering three-year FGNSBs at a coupon of 10.600 per cent per annum, 20.03 per cent below 13.255 per cent offered for similar bond in December 2022.

Minimum subscription to the pro-low savers bonds is N5,000 with maximum subscription per subscriber capped at N50 million. Application list for the bonds closes on Friday, December 09, 2022.

The new two-year bond and three-year bond will mature on January 11, 2025 and January 11, 2026 respectively.

Application list, which opened today, will close on Friday, January 06, 2023 and the settlement date will be Wednesday, January 11, 2023.

The coupons or interest rates, which are traditionally paid quarterly, will be paid on April 11, July 11, October 11 and January 11 respectively.

The FGNSBs are designed to have most of the features of the existing sovereign bond but with other benefits to the bondholder, including low amount of minimum subscription, listing on stock exchange and trading on the bonds.

The coupon is paid on a quarterly basis, providing investors with a regular stream of incomes.

The FGNSB was introduced in 2017 as a mass instrument for nationwide mobilization of savings and investments. Minimum subscription to the FGNSB is usually N5, 000 while the bond pays coupon or interest rate on a quarterly basis.

Usually, the minimum subscription to the bonds, offered at N1,000 per unit, is N5,000 or five units and in multiples of N1,000 thereafter, subject to a maximum subscription of N50 million.

GTI Securities Limited, one of the authorised distribution agents for the FGNSB, had explained that the savings bonds help to deepen national savings culture while providing opportunity to all Nigerians irrespective of income level to contribute to and benefit from national development.

According to the stockbroking firm, FGNSB enables all Nigerians opportunity to participate in and benefit from the favourable returns available in the capital market.

GTI Securities noted that the savings bonds are acceptable as collateral for loans by banks and can be sold for cash in the secondary market before maturity.

The bonds are usually listed on the stock exchange for trading, thus providing liquidity for investors who want to exit before maturity.

Savings bonds are good for savings towards retirement, marriage, school fees and house projects among other targets while assuring on its safety as the bonds are backed by the full faith and credit of the Federal Government of Nigeria.