The Federal Government of Nigeria, through the Debt Management Office (DMO), has officially opened the window for subscriptions to the Federal Government of Nigeria (FGN) savings bonds for the month of October 2024.
According to the announcement from the DMO, the subscription period is set to run for five days, starting from October 2, 2024, allowing interested investors to participate within this timeframe.
The offer includes a two-year savings bond maturing on October 16, 2026, with a 17.084% interest rate, and a three-year savings bond maturing on October 16, 2027, offering a higher interest rate of 18.084%.
Each bond unit is priced at N1,000, with a minimum subscription of N5,000 and additional investments accepted in multiples of N1,000. Investors can subscribe to these bonds with a maximum investment of N50 million, with interest payments made quarterly.
The subscription period for these bonds officially commenced on October 7, 2024, and will remain open until October 11, 2024, according to details released by the DMO.
Upon completion of the subscription phase, settlement is planned for October 16, 2024. Investors who participate will receive their quarterly coupon payments on January 16, April 16, July 16, and October 16 each year.
Increased interest rates
The interest rate of 18.084% offered on the current FGN savings bonds marks a significant increase when compared to rates from the previous year. In October 2023, the interest rate for a similar offering stood at 12.074%, representing a sharp increase of 6.01 percentage points over a span of one year.
This rise in interest rates is attributed to the monetary policies adopted by the Central Bank of Nigeria (CBN), which has been increasing interest rates since February 2024.
The CBN’s strategy includes raising interest rates to combat inflation and stabilize the foreign exchange market, making Nigerian bonds more attractive to foreign portfolio investors (FPIs) seeking higher yields.
In a recent policy move, the CBN caught market observers by surprise by raising its benchmark interest rate by an additional 50 basis points, bringing it to 27.25%.
Furthermore, the CBN increased the Cash Reserve Ratio (CRR), pushing it up by 500 basis points to 50% for commercial banks, while the CRR for merchant banks rose by 200 basis points to 16%.
These actions have created a favorable environment for the FGN savings bond offer, drawing substantial interest from both domestic and foreign investors.
Results from the September FGN Bond Auction:
- In a related development, the Federal Government of Nigeria successfully raised N414.88 billion through its FGN bond auction in September, reflecting a strong demand among investors for longer-term securities.
- The auction included three separate bonds with varying maturities—5 years, 7 years, and 9 years.
- Among the three, the 9-year bond proved to be the most appealing to investors, attracting a substantial subscription volume of N337.34 billion, far exceeding the initial offering of N30 billion.
- It was allotted N230.716 billion at a marginal rate of 20.05%, highlighting the keen investor interest and oversubscription.
- Meanwhile, the 7-year and 5-year bonds also saw notable engagement, with total subscriptions of N54.979 billion and N22.555 billion, respectively, further reflecting the market’s appetite for fixed-income securities amidst a rising interest rate environment.
