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Debt Securities

DMO set to auction N150 billion in FGN Bonds to investors  

The FG on Wednesday, 20, November 2019, through the DMO, would offer fresh FGN Bonds valued at N150 billion for subscription. 

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FGN Bonds, bond, DMO set to auction N150 billion in FGN Bonds to investors , FGN Bond for February 2020 oversubscribed by investors, DMO suspends April 2020 FGN savings bond offer

The Federal government (FG) on Wednesday, 20, November 2019, through the Debt Management Office (DMO), would offer fresh Federal Government Bonds (FGN Bonds) valued at N150 billion for subscription.

According to the offer circular released to the public, the DMO disclosed that the bonds to be offered would include a 5-year N50 billion FGN APR 2023 bond at 12.75%, a 10-year N50 billion FGN APR 2029 bond at 14.55% and a 30-year N50 billion FGN APR 2049 bond at 14.80%. The settlement date for the subscription is scheduled for Friday, November 22, 2019.

The DMO disclosed that the FGN bonds, which qualify as securities, which trustees can invest under the Trustee Investment Act, also qualify as liquid assets for liquidity ratio calculation for banks. The bonds are to be listed on the Nigerian Stock Exchange and FMDQ OTC Securities Exchange.

FGN Bonds

Investments in FGN Bonds as stated in the circular by DMO qualify for tax exemption to pension funds and other investors.

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“Government securities within the meaning of Company Income Tax Act (“CITA”) and Personal Income Tax Act (“PITA”) for Tax Exemption for Pension Funds, amongst other investors,” DMO offer Circular stated.

The bonds are to be offered at N1,000 per unit, subject to a minimum subscription of N50,001,000, and in multiples of N1,000, thereafter. The bonds’ interests are to be semi-annually, and bullet repayments made on the maturity date. The DMO reserves the right to alter the amount allotted in response to market conditions

Interested in buying? The DMO advised interested investors to contact the following stockbroking firms which are its appointed distribution agents.

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(READ MORE: FGN Bonds record first undersubscription in 2 years)

  • Access Bank Plc;
  • First Bank of Nigeria Limited;
  • Standard Chartered Bank Nigeria Limited;
  • Citi Bank Nigeria Limited;
  • First City Monument Bank Plc;
  • United Bank for Africa Plc;
  • Coronation Merchant Bank Limited;
  • FSDH Merchant Bank Limited;
  • Zenith Bank Plc;
  • Ecobank Nigeria Limited;
  • Guaranty Trust Bank Plc;
  • FBNQuest Merchant Bank Limited; and
  • Stanbic IBTC Bank Plc.

However, the DMO will also make allotments on a non-competitive basis for the additional sum of N25 Billion 12.75% FGN APR 2023, N20 Billion 14.55% FGN APR 2029 and N5 Billion 14.80% FGN APR 2049.

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 the 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.

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Debt Securities

United Capital Plc raises N15 billion through Commercial Paper

United Capital Plc. has successfully raised the sum of N15billion in its recently issued Series 3 Commercial Paper.

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Commercial paper, United Capital Asset Management explains mutual funds’ positive performance

United Capital Plc. has announced that it has successfully raised the sum of N15billion in its recently issued Series 3 Commercial Paper (‘’CP’’) under a N20billion programme registered with the FMDQ Securities Exchange.

This is according to a disclosure signed by the firm’s Secretary, Leo Okafor, and sent to the Nigerian Stock Exchange market.

READ: United Capital Plc releases H2 2020 Outlook report titled “Up In The Air”

The recent corporate action is sequel to successfully raising the sum of N5.3 billion in April 2020, through a debut Series 1&2 Commercial Paper issuance.

READ: CardinalStone’s Debut Commercial Paper Issuance records 148% subscription

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What you should know

  • The Series 3 issuance with a maturity period of 270 days was issued at a yield of 1.26% and had a subscription of circa 112% with firm commitments from a pool of institutional investors, particularly Asset Managers.
  • This issuance set another ground breaking record in the Nigerian Capital Markets, being the lowest yield on record for a 270-day CP issuance by a nonbank issuer.
  • FSDH Capital Limited, United Capital Plc, and UCML Capital Limited, acted as arrangers to the transaction.
  • According to Investopedia, Commercial paper is a commonly used type of unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable and inventories, and meeting other short-term liabilities.

(READ MORE: Zenith Bank discloses projections following release of CBN’s latest Treasury Bills calender)

  • Maturities on commercial paper typically last several days, and rarely range longer than 270 days. In addition, Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates.

READ: Dangote Cement’s N100 billion CP admitted on FMDQ Securities Exchange

What they are saying

Commenting on the recent development, the Group Chief Executive Officer, Mr. Peter Ashade said: “The commercial paper issuance is in line with our bid to diversify our funding sources, strengthen our capital base and intensify our strategic initiatives aimed at providing innovative financing solutions to our clients.”

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Debt Securities

N200 billion Unclaimed Dividend: Securities dealers reject FG’s plan to manage fund

ASHON has rejected plans by the Federal Government of Nigeria to manage the N200 million unclaimed dividends.

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Some capital market experts, represented by the Chairman of the Association of Securities Dealing Houses of Nigeria, have rejected plans by the Federal Government of Nigeria to manage unclaimed dividends – which is projected to hit N200bn by the end of this year, according to a report by Punch.

The Chairman, Association of Securities Dealing Houses of Nigeria, Onyenwechukwu Ezeagu, explained that capital market regulators and operators had leveraged technology to put in place many initiatives to address the issue of unclaimed dividends. Some of these initiatives include de-materialization of shares, which entails upload of quoted companies share in the Central Securities Clearing System for ease of reconciliation, adoption of e-dividend and e-mandate, consolidation of multiple accounts, identity management engagements, and introduction of electronic Initial Public Offering.

(READ MORE: Nigeria needs $5billion for National Broadband Plan – Chairman, BISC)

What they are saying

Commenting on the recent development, Mr. Ezeagu said, “Generally, the incentives for savers and capital providers in the capital market is the expectation of dividends and capital appreciation.

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It is, therefore, our considered view that the proposed legislation, if passed, will be a great disincentive to savings, long-term capital mobilization, and serious disruption of the Nigerian economy, since it will take away the only expectation of investors in the market.”

Corroborating him, the President, Chartered Institute of Stockbrokers, Mr. Olatunde Amolegbe, said the Securities and Exchange Commission would always ensure the transfer of unclaimed dividends to the capital reserves of the company for restricted utilization, such as capital expansion and issuance of bonus shares to the company’s shareholders.

What you should know

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Nairametrics had earlier reported that some law makers (Reps) raised alarm over N200 billion unclaimed dividends in 2020. In lieu of this perceived need, a proposal for the creation of an unclaimed dividend and utilized bank balance trust fund was emphasized in the 2020 Finance Bill — wherein, dividends declared and unclaimed would be warehoused and owed as a perpetual debt to shareholders.

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Debt Securities

Chapel Hill Denham Nigeria infrastructure debt fund offers up to N20.2 billion

A leading Nigerian investment bank announced Chapel Hill Denham Nigeria Infrastructure Debt Fund Series 7 Offer of up to N20.24 Billion

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Crises also create opportunities” –Chapel Hill Denham’s CEO on COVID-19

Chapel Hill Denham Advisory Limited and Chapel Hill Denham Management Limited announced the opening of Chapel Hill Denham Nigeria Infrastructure Debt Fund Series 7 Offer of up to N20.24 billion under the CHD NIDF’s N200 billion Issuance Programme.

READ: NSIA to invest $5 million in Chapel Hill Infrastructure Fund

What you should know

The proceeds from the offer will be applied towards infrastructure loans approved by the fund manager’s investment committee.

  • It also disclosed that African Development Bank (AfDB), following its announcement in October 2018 to invest in the NIDF, will be committing the Naira equivalent of USD$10 million to the series 7 offer.
  • AfDB’s commitment to the NIDF was on the back of a detailed due diligence and review process undertaken by a multi-disciplinary team of AfDB experts.

READ: Top 10 Stockbroking firms trade shares worth N138.1 billion in January 

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In the current volatile yield environment, the NIDF still remains a compelling investment outlet, both from a total return and cash yield perspective.

With net assets in excess of N58.6 billion, the Fund continues to deliver consistent and predictable returns, along with principal preservation to investors.

What this means

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The cash yield generated by the CHD NIDF has consistently been above the 10-yr FGN. Since its inception in June 2017, the fund has delivered a total return of 82.3% (assuming the cash distributions were reinvested). Total returns for the trailing twelve months (up to September 2020) was 12.4%.

READ: Nigerian mutual funds made an estimated N1.9 billion gain in 2018

Highlights of the Chapel Hill Denham Nigeria Infrastructure Debt Fund include:

  • Entity: Chapel Hill Denham Nigeria Infrastructure Debt Fund
  • Fund Manager: Chapel Hill Denham Management Limited
  • Structure: Close-ended Unit Trust, regulated by the Nigerian Securities & Exchange Commission. Compliant with PENCOM Investment Guidelines and SEC Rules on Infrastructure Funds.
  • Program: ₦200 Billion under which the Units will be issued from time to time
  • Series: 7 Offer
  • Size: Up to ₦20.24 billion
  • Offer: Price ₦109. 58 per unit
  • Offer: Units 184,740,440 units
  • Minimum Subscription: 100,000 units
  • Offer: Open Date November 16, 2020
  • Offer: Close Date December 9, 2020
  • Listing: FMDQ-OTC

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