The Nigerian Federal Government, through the Debt Management Office (DMO), is targeting N180 billion from the bond market in October 2024.
This represents a 20% increase from the N150 billion offered in September, according to observations by Nairametrics. The higher target aligns with the government’s ongoing strategy to finance essential projects and meet fiscal obligations via the bond market.
Breakdown of Bond Offers
The DMO’s bond offer circular outlines two re-openings of previously issued bonds for auction. The first is the N90 billion 19.30% FGN APR 2029 (a 5-year reopening), while the second is the N90 billion 18.50% FGN FEB 2031 (a 7-year reopening).
The auction date is set for October 21, 2024, with settlement on October 23, 2024. Units of sale are priced at N1,000 per unit, with a minimum subscription of N50,001,000. Investors can bid in multiples of N1,000 beyond this minimum.
These bonds offer semi-annual interest payments and feature bullet repayment upon maturity. They are considered low-risk investments, backed by the full credit of the Federal Government of Nigeria, and secured by the country’s general assets.
Additionally, the bonds are eligible for investment under the Trustee Investment Act and are exempt from taxes for pension funds and other investors under the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA).
The bonds are listed on both the Nigerian Exchange Limited and FMDQ OTC Securities Exchange, further enhancing their appeal. They also qualify as liquid assets for banks when calculating liquidity ratios, making them an attractive option for financial institutions.
How to Participate
Investors interested in purchasing these bonds can approach accredited Primary Dealer Market Makers (PDMMs), which include top financial institutions like Access Bank Plc, First Bank of Nigeria Ltd, Stanbic IBTC Bank Ltd, and Citibank Nigeria Ltd.
Key Points to Note
In the September bond auction, the Federal Government raised N264.527 billion, surpassing its initial target. The auction, held on September 23, 2024, reopened three tranches of FGN bonds: the 19.30% FGN APR 2029 (5-year bond), the 18.50% FGN FEB 2031 (7-year bond), and the 19.89% FGN MAY 2033 (9-year bond).
Total subscriptions in September reached N414.881 billion, though only N264.527 billion was allotted, indicating strong demand, especially for longer-term bonds.
Additionally, marginal rates in the September auction were lower than in the previous month, signaling that the government secured funding at a reduced cost. This could potentially lower its debt servicing burden.
