FG Plans To Raise N450 Billion From January 2025 Bond Auction

The Federal Government of Nigeria (FGN), through the Debt Management Office (DMO), announces plans to generate N450 billion from its January 2025 bond auction. This amount exceeds the N360 billion raised in January 2024 and the N120 billion secured in December 2024, highlighting the government’s growing reliance on domestic borrowing to manage fiscal challenges.

This bond issuance aims to address budget deficits while providing investment opportunities for institutional and individual investors. The auction includes a combination of reopened and newly issued bonds, catering to diverse investment preferences.

The January auction features three categories:

• Five-year bond (April 2029 maturity) – Reopened with a 19.30% coupon rate, targeting N100 billion.
• Seven-year bond (February 2031 maturity) – Originally issued with an 18.50% coupon rate, aiming to raise N150 billion.
• Newly issued ten-year bond (FGN January 2035 bond) – The largest issuance, seeking N200 billion.

The auction is set for January 27, 2025, with a settlement date of January 29, 2025. Successful bidders will gain ownership of the bonds and begin earning interest immediately after settlement.

Key Features of the Bonds

• Investment Units: Available in N1,000 units, with a minimum subscription of N50,001,000, increasing in increments of N1,000.
• Interest Payments: Investors receive semi-annual interest payments, ensuring steady returns.
• Maturity & Redemption: Bonds are fully redeemed at maturity, providing a lump-sum payout.
• Tax Benefits: Qualified investors, such as pension funds, benefit from exemptions under the Company Income Tax Act (CITA) and Personal Income Tax Act (PITA).
• Market Accessibility: Listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange, allowing for easy trading.
• Liquidity Status: Recognized as liquid assets for financial institutions to meet liquidity ratio requirements.
• Government Guarantee: Fully backed by the Federal Government of Nigeria, ensuring security for investors.

The DMO facilitates bond subscriptions through Primary Dealer Market Makers (PDMMs), including major financial institutions like Access Bank Plc, Zenith Bank Plc, Stanbic IBTC Bank Ltd, and United Bank for Africa Plc. Interested investors are advised to consult these institutions for guidance on the subscription process.

Key Takeaways from the Bond Issuance

• The government continues to depend on domestic debt markets to address fiscal gaps and sustain economic growth.
• The bonds, offering competitive yields, tax exemptions, and high security, are expected to attract strong investor interest.
• The FGN Bond Issuance Calendar projects a total of N1.8 trillion to be raised from the bond market in the first quarter of 2025, with auctions scheduled for January, February, and March.
• The proceeds will support critical infrastructure projects and help stabilize the economy.

With investor confidence in government-backed securities remaining strong, the January 2025 bond auction is expected to play a crucial role in strengthening Nigeria’s financial landscape.