KEY POINTS
- DMO opens N1 trillion FGN bond offer on Sept. 14.
- The offer comprises a new 10 year bond and a 15 year reopening.
- Minimum subscription is N50 million, with interest payable twice yearly.
- The securities are backed by the full faith and credit of the Federal Government.
MAIN STORY
The Debt Management Office (DMO) has opened a N1 trillion Federal Government of Nigeria (FGN) bond offer to investors as part of the government’s domestic borrowing programme.
The offer, which opens on Sept. 14, comprises two securities with a settlement date of Sept. 16.
The first is a new 10 year FGN bond valued at N400 billion and due in September 2036.
The second is a N600 billion reopening of the FGN bond due in 2038, carrying a coupon rate of 15.45 per cent per annum.
The DMO said the bonds would be offered at N1,000 per unit, subject to a minimum subscription of N50 million and additional subscriptions in multiples of N1,000.
For the reopened bond, the coupon has already been established. The DMO said successful investors would pay a price determined by the yield to maturity bid that clears the volume offered, together with any accrued interest.
Interest on the bonds will be paid every six months, while the principal will be repaid in full when each bond reaches maturity.
THE ISSUES
- The size of the offer reflects the Federal Government’s continued reliance on the domestic debt market to raise funds for its financing needs.
- The N50 million minimum subscription places the primary offer mainly within reach of institutional and high value investors, rather than smaller retail investors.
- The long maturity periods give investors access to fixed income instruments that can provide returns over an extended period, while committing their funds for several years.
- The reopening of the 2038 bond allows investors to participate in an existing government security whose coupon has already been established, with the final purchase price determined by the clearing yield.
WHAT’S BEING SAID
“The FGN bonds are offered at N1,000 per unit subject to a minimum subscription of N50 million and in multiples of N1,000 thereafter.” – Debt Management Office
“For re openings of previously issued bonds, (where the coupon is already set), successful bidders will pay a price corresponding to the yield to maturity bid that clears the volume being auctioned, plus any accrued interest.” – Debt Management Office
“Interest is payable semi annually, while bullet repayment is on the maturity date.” – Debt Management Office
WHAT’S NEXT
The subscription window opens on Sept. 14, with settlement scheduled for Sept. 16. Successful investors will receive semi annual interest payments until the respective maturity dates.
BOTTOM LINE
The DMO is offering N1 trillion in FGN bonds across two long term securities, giving investors another avenue to hold Federal Government debt while providing the government with domestic financing.
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