The Federal Government’s bonds which auctioned on Wednesday, June 26, 2019, were oversubscribed by N60.13 billion, indicating an oversubscription rate of 60%.
Total Breakdown: The Federal Government received total bond of ₦160.13 billion, comprising ₦39.34 billion for 12.75 percent FGN April 2023 bonds, ₦60.30 billion for 14.55 percent FGN April 2029 bonds, and ₦60.49 billion for 14.80 percent FGN April 2049 bonds.
Nairametrics understands that investors are more interested in instruments with longer tenors, which is why the 30-year bond was oversubscribed by 100 percent. Similarly, the 10-year bond was also oversubscribed by over 50 percent, while the 5-year tenor witnessed a 31 percent subscription rate.
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How the June bonds were initially expected to be subscribed: The bonds consisted of a ₦30,000,000,000 at 12.75% interest rate maturing on APR 2023 (5-Yr bond); ₦40,000,000,000 at 14.55 per cent interest rate maturing on APR 2029 (10-Yr bond re-opening); and ₦30,000,000,000 at 14.80 per cent interest rate maturing on APR 2049 (30-Yr bond re-opening).
Understanding Bonds: A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. A bond has an end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments that will be made by the borrower.
Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debt holders, or creditors, of the issuer.
When companies or other entities need to raise money to finance new projects, maintain ongoing operations, or refinance existing debts, they may issue bonds directly to investors. The borrower (issuer) issues a bond that includes the terms of the loan, interest payments that will be made, and the time at which the loaned funds (bond principal) must be paid back (maturity date).
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