The Debt Management Office (DMO) on behalf of the federal government has announced the offer for subscription by auction for its FGN January bond, with its auction date set for February 16, 2022.
This is contained in a recent circular published by the DMO on its website. According to the disclosure, the issuance will be in two tranches, as it aims to raise a sum of N75 billion from each of the bond issuance.
Highlight
- The first tranche is the 10-year, 12.5% FGN Jan 2026 re-opening bond, while the second is the 20-year, 13% FGN 2042 reopening bond.
- Auction date: February 16, 2022
- Settlement date: February 18, 2022
- Units of sale: N1,000 per unit subject to a minimum subscription of N50,001,000 and in multiples of N1,000 thereafter.
According to the circular, in terms of interest rate 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, in addition to any accrued interest on the instrument.
Backstory
Recall that Nairametrics reported that the DMO announced the offer for subscription for its February 2022 FGN savings bond to investors, with interest rates of 7.22% and 8.22% for the 2-year and 3-year bond respectively.
Also, a month-on-month comparison shows that the rates for the two tranches are lower compared to 7.542% and 8.542% offered for the 2-year FGN savings bond due January 19, 2024, and 3-year FGN Savings bond due January 19, 2025, respectively.
About FGN bond issuance
- A government bond is a debt security issued by a government to support its spending obligations. Government bonds can pay periodic interest payments called coupon payments.
- They are often considered low-risk investments since the issuing government backs them.
- The FGN bonds are backed by the full faith and credit of the Federal Government of Nigeria and charged upon the general assets of Nigeria.
- It also qualifies as securities in which trustees can invest under the Trustee Investment Act.
- It qualifies as 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.
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