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Debt Securities

DMO is offering FGN Savings Bond for June 2019; this what you can get

@DMONigeria has released details for the June 2019 FGN Savings Bond offer and this is what you can get if you subscribe.

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FGN Bonds, FG lists N296 billion savings bonds on NSE, Investment Alert: The FGN Savings Bond is now open for subscription

The Debt Management Office (DMO) has released details for the June 2019 FGN Savings Bond offer. Below are the details:

How much can I buy? ₦1,000 per unit, subject to a minimum subscription of ₦5,000 and in multiples of ₦1,000 thereafter, subject to a maximum subscription of ₦50,000,000.

What is the minimum amount I can buy? Based on the above, the minimum amount you can buy is ₦5,000.

Interest rates: A 2-year FGN savings bond, due June 19, 2021, is rated at 11.418% per annum.

A 3-year FGN savings bond, due June 19, 2022, is 12.418% per annum.

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When are coupon payment dates? September 19, October 19, March 19, June 19.

When will the principal be paid? Bullet repayment on the maturity date.

What about security for my money? The loan is backed by the full faith and credit of the Federal Government of Nigeria and charged upon the general assets of Nigeria.

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From where can I buy it? Contact your stockbroker if you want to buy the June 2019 FGN Savings Bond offer.

Remember that the offer closes by Friday this week (June 14).

What do you get when you invest?

Invest ₦100,000 – ₦11,418 per annum for a 2-year savings bond, and ₦12,418 per annum for a 3-year savings bond.

Invest ₦500,000 – ₦57,090 per annum for a 2-year savings bond, and ₦62,090 per annum for a 3-year savings bond.

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Invest ₦1 Million – ₦114,180 per annum for a 2-year savings bond, and ₦124,180 per annum for a 3-year savings bond.

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Remember that interest is paid quarterly. To get how much you will earn quarterly, divide what you get above by 4.

3 Comments

3 Comments

  1. MUSA ASHOM

    June 13, 2019 at 6:50 pm

    Thank you so much this is the exact info and calculations I have been looking for in the wrong places. Keep it up

  2. MUSA ASHOM

    June 13, 2019 at 9:01 pm

    Please help me authenticate this info and calculations ” A #50,000 invested on a three years bond tenure in May 2019 at 12.745 percent would deliver #6,372.5 every three months till May 2022, bringing the total possible coupon payment to #76,470 excluding the bullet repayment of the invested #50,000 on the maturity date “. Thanks.

    • Alfred Akuki

      June 14, 2019 at 9:23 am

      Hi Musa, if you invest N50,000 in an FGN Savings bond with a tenor of 3 years and an interest of 12.745%, your total accrued interest will be N6,372.5. To know the amount you get on coupon payments, divide the interest by the number of times for coupon payments. That means you get N1,593.125‬ for every coupon payment until maturity. FGN bonds are essentially for capital preservation.

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Debt Securities

Commercial Paper value appreciates by N243 billion YOY, hits N539.8 billion in H1, 2020

Commercial Paper value appreciated by 81.9% to N539.8 billion in 45 issuances as of H1, 2020.

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Commercial Paper value appreciates by N243 billion YOY, hits N539.8 billion in H1, 2020, Financial literacy campaign in Nigeria, Securities and Exchange Commission, National Insurance Commission, Dantata Success & Profitable Company

Commercial Paper value hits N539.8 billion as of June 2020, as the value appreciated by 81.9% from N296.8 billion in 44 issuances as of H1, 2019 to N539.8 billion in 45 issuances as of H1, 2020. This is according to a recent report by PWC titled, “Nigeria Capital Market Update.”

READ: CBN invests over N120 billion on 320,000 farmers across CTG within four years

As regards industry spread, the financial services sector accounted for 32% of the proceeds raised as of H1 2020, followed by the consumer goods sector representing 26% of total proceeds. ICT raised 19% and Industrial goods contributed 18%.

READ: Zenith Bank’s Profit After Tax in H1,2020 rises by 16.8% to N103.8 billion

In terms of yearly appreciation, Commercial Paper value has maintained an upward trend, recording N114 billion as of the end of 2016, N221 billion in 2017, N402 billion in 2018, and N540 billion in H1, 2020.

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What this means

Activities in the Commercial Paper market maintained its upward trajectory as more blue-chip companies continue to access short term funding from a diversified investor base, through the capital market and on favorable terms.

READ: TradeDepot raises $10 million in pre-Series B equity round

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What you should know

Commercial Paper is a commonly used type of unsecured, short-term debt instrument issued by corporations, typically for the financing of payroll, accounts payable and inventories, and meeting other short-term liabilities. Maturities typically last several days and rarely range longer than 270 days.

It is usually issued at a discount from face value and reflects prevailing market interest rates.

Explore Data on the Nairametrics Research Website

Use Advanced Financial Calculators on Nairametrics

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Debt Securities

Nigerian Treasury Bills drop to 2% per annum

The latest data from Nigeria’s Treasury bill auction shows that Nigeria’s 364-day reduced by 2%.

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The latest data from Nigeria’s Treasury bill auction shows that Nigeria’s 364-day reduced by 2%. On the other hand, Stop rates moderated slightly for the 91-day tenors and 182-day tenors. The 91-day bills had stop rates of 1 % and 182-day bills also went by 1%.

READ: Real estate: Experts lament over challenges in the industry

At the auction, the Debt Management Office (DMO) sold N12.76 billion on the 91-day paper, N4.5 billion on the 182-day, and N107.6 billion on the 364-day bill despite huge demand from Investors.

READ: PIB; Will the jinx be broken this time around?

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READ: Safest, regulated Cryptocurrency, Arcoin backed by U.S. Treasury securities

What you need to know

Basically, when the government goes to the financial markets to raise money, it can do it by issuing two types of debt instruments – Treasury Bills and Government Bonds. Treasury bills are issued when the government needs money for a short period, while Bonds are issued when it needs debt for more than say five years.

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  • The issuance of treasury bills is also used as a mechanism to control the circulation of funds in the economy.
  • Treasury bills have a face value of a certain amount, which is what they are actually worth.
  • However, they are sold for less. For example, a bill may be worth N10,000, but you would buy it for N9,600.
  • Every bill has a specified maturity date, which is when you receive the money back.
  • The government then pays you the full price of the bill (in this case N10,000), giving you the opportunity to earn N400 from your investment. The amount that you earn is considered as the interest, or your payment for lending money to the government.
  • The difference between the value of the bill and the amount you pay for it is called the discount rate and it is set as a percentage.

READ: Where to invest your N5m to N500m safely and securely

READ: National Assembly approves Federal Government’s plan to borrow $11 billion in 2021

What they are saying

Peter Omoregie, CFA, Head Proprietary Trading at CardinalStone Partners Limited, in a phone interview with Nairametrics, explained why investors oversubscribed Nigeria’s Treasury bills in spite of low rates.

“The CBN continues with de-leveraging its balance sheet and favoring its growth policies over the attraction of FPI money, which is good for businesses and the country at large. Surprisingly, we had a huge subscription on the long end at these low rates. The local institutional investors are addicted to Tbills like a junkie on cocaine, they don’t know how or when to stop.”

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READ: Real Estate Developers express fear over selection process of CBN’s N200 billion Housing Fund

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READ: COVID-19: How CBN policies helped prevent the collapse of the Nigerian economy – Oscar Onyema

Why this matters

The massive disparity between the subscriptions and the offers recorded suggests investors are willing to earn a negative real return, compared to the higher risk in other assets such as stocks and real estate. Basically, the CBN sells T-bills on a bi-weekly basis to investors and it is one of the safest investments available. Interests are paid upfront and the principal paid in full upon maturity.

Explore Data on the Nairametrics Research Website

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Debt Securities

Nigeria will not issue Eurobonds, says Vice President Yemi Osinbajo

Vice President Yemi Osinbajo disclosed recently that Nigeria will not be issuing Eurobonds.

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Nigeria will not issue Eurobonds, says Vice President Yemi Osinbajo, FG guarantees mortgage loan to low income buyers at low interest rate, FG inaugurates gold refinery project in a landmark event

Vice President Yemi Osinbajo disclosed recently that Nigeria will not be issuing Eurobonds due to their costs, and was considering further options in capital to boost Africa’s largest economy in the face of a looming recession.

The Vice President said this in a report credited to Reuters News.

“We are not likely going to explore again the Eurobond market because we are trying to avoid commercial borrowing,” Osinbajo said.

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Africa’s largest economy has been on the squeeze, with the worst pandemic known to man, disrupting Nigeria’s major export earning, crude oil, and the poor participation of foreign portfolio investors which crunched Nigeria’s earning at unprecedented levels.

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However, Michael Nwakalor, a Macroeconomist at CardinalStone Research, in a note seen by Nairametrics gave key vital insights on why Nigeria’s fiscal players might consider such a move in view of taking the FGN 2021 budget into play.

READ: Nigeria makes sudden U-turn, suspends external borrowing from international debt market 

“In our view, given its ever-widening budget deficit and concurrent FX needs, Nigeria may be tempted to revisit the Eurobond market next year after having shelved plans to raise $3 billion in 2020 following the COVID-19 outbreak. However, a return to the international debt market may, ultimately, depend on external financing conditions. Even though weaker oil prices and domestic FX liquidity issues are concerning, the Fed’s long-term dovish posture and relative stability in the Eurobond market suggest that a few providers of long-term capital may still be up for some risks. That said, investors are likely to demand a premium to pre-pandemic levels of c.7.5%, on duration, for a potential Eurobond issuance,” it stated.

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READ: $945 million worth of BTCs options expiring this week

If recent body language, statements by Nigeria’s fiscal policymakers are taken into full consideration, it’s likely Nigeria might consider multinational lenders like World Bank rather than going to the overseas debt market, as the nation seeks cheaper options in building its commodity-dependent economy.

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