Fed Govt to raise N300b new bonds from investors

The federal government plans to raise some N300 billion from new bond issuances this month.

The Debt Management Office (DMO), which oversees government’s bond issuances and general debt management, indicated that government will raise new debt capital through the issuance of savings bonds and re-opening of earlier issued regular bonds.

Application list for November 2022 tranche of the Federal Government of Nigeria Savings Bond (FGNSB) is scheduled to close tomorrow. Government will conduct the bond auction for the reopening of three existing bonds on Monday, November 14.

Prospectus issued by the Debt Management Office (DMO), indicated that the government would be raising N225 billion through reopening of three previously issued mid-to-long term bonds.

The bonds being reopened include the 10-year bond, which matures in April 2029. Also being reopened is the 10-year which matures in April 2032 and the long-term 20-year bond with maturity date of January 2037.

The government plans to raise N75 billion each from the three bonds, totalling N225 billion. Nigeria depends on regular debt issuances to finance budget deficits as poor infrastructure and insecurity continue to threaten government’s revenue.

The DMO on Monday opened application list for two tranches of FGNSBs with two-year and three-year tenors. The ongoing November 2022 issuance is the 65th tranche of the savings bond, introduced in 2017.

The government is offering the two-year sovereign retail bond at a coupon of 12.492 per cent with maturity on November 16, 2024. It is also simultaneously offering three-year FGNSBs at a coupon of 13.492 per cent with maturity on November 16, 2025.

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 November 11, 2022.

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.

It will also be backed by the full faith of the Federal Government of Nigeria and is therefore deemed risk-free.

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 the national savings culture while providing opportunities 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 its safety as the bonds are backed by the full faith and credit of the Federal Government of Nigeria.