The Federal Government seeks to borrow N450 billion from its third FGN bond auction of 2024, according to the latest circular from the Debt Management Office (DMO).
This figure is 82% less than the N2.5 trillion target from the same bond auction in the previous month.
According to the circular seen by Nairametrics, the auction is set for March 18, 2024, with a settlement date of March 20, 2024.
Auction Details and Offerings
- The DMO’s circular detailed that the offer includes three different bonds: a new 3-year bond for March 2027, and re-openings of the 18.50% FGN February 2031 and the 19.00% FGN February 2034 bonds
- Each bond has an allocation of N150 billion, totaling the government’s N450 billion borrowing target for this month.
Investor Participation and Benefits
Investors will purchase these bonds at a price corresponding to the yield-to-maturity bid that clears the auction volume and any accrued interest.
These bonds, being crucial instruments for the government’s debt management strategy, serve multiple purposes, including providing investors with a relatively safe investment option, assisting in managing the country’s debt profile, and facilitating efficient fund management.
Subscription and Security Features
The offer states that the units of sale will be at N1,000 per unit, with a minimum subscription of N50,001,000, and subsequent subscriptions in multiples of N1,000. The interest on these bonds is payable semi-annually until maturity, where a bullet repayment is scheduled.
Notably, the FGN bonds carry the full faith and credit of the Federal Government of Nigeria, making them a secure investment. They are charged upon the general assets of Nigeria and are listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange.
Also, these bonds qualify as securities in which trustees can invest under the Trustee Investment Act, are recognised as government securities within the meaning of Company Income Tax Act (CITA) and Personal Income Tax Act (PITA) and qualify as liquid assets for the calculation of liquidity ratio for banks.
What you should know
- In 2023, the Federal Government raised about N5.49 trillion through FGN bond auctions which were used to finance the 2023 budget deficit of N11.34 trillion.
- In January 2024, the Federal Government raised about N418.197 billion from the four bonds that were auctioned.
- The Federal Government in February 2024 realised N1.49 trillion from the two FGN bond offer issued by the DMO below the target of N2.5 trillion.
- With the budget deficit in the 2024 budget put at N9.18 trillion, the Federal Government seems committed to borrowing more from the domestic market.