The Federal Government of Nigeria, through the Debt Management Office (DMO), has announced plans to raise N120 billion through the auction of two Federal Government Bonds.
The auction, scheduled for December 16, 2024, will offer investors an opportunity to subscribe to reopened debt instruments, with settlement set for December 18, 2024.
This was the same amount offered in the previous month, which was one of the lowest amounts offered this year, as the Federal Government seemed to slow down on bond offerings.
Breakdown of the December bond auction
- The bond offering comprises a 19.30 per cent April 2029 bond, a five-year reopening valued at N60 billion, and an 18.50 per cent February 2031 bond, a seven-year reopening also valued at N60 billion. Both instruments are reopenings of previously issued bonds, allowing investors to participate at current market yields.
- Each bond unit is priced at N1,000, with a minimum subscription of N50,001,000 required. Investors can purchase additional units in multiples of N1,000. The yield-to-maturity bid that clears the auction volume will determine the final price for successful bidders, along with any accrued interest.
- The bonds will pay interest semi-annually, providing investors with periodic returns until maturity. Redemption will occur via a bullet repayment at the end of the bonds’ respective terms, ensuring the full principal amount is returned to investors.
What you should know
Several features make these bonds attractive to investors. They qualify for tax exemptions under the Company Income Tax Act and the Personal Income Tax Act, making them particularly appealing to pension funds and other institutional investors. Listed on the Nigerian Exchange Limited and the FMDQ OTC Securities Exchange, the bonds are tradable assets. They also qualify as liquid assets for liquidity ratio calculations for banks, enhancing their appeal to financial institutions.
- The bonds are fully backed by the Federal Government of Nigeria, secured by the country’s general assets. This guarantee underscores the safety and reliability of the investment for both retail and institutional investors.
- The DMO has encouraged interested investors to contact any of the Primary Dealer Market Makers (PDMMs) authorized to facilitate the auction. These include leading financial institutions such as Access Bank, Zenith Bank, Guaranty Trust Bank, and First Bank of Nigeria.
- This bond issuance is part of the Federal Government’s strategy to mobilize domestic funds to finance critical infrastructure projects and meet budgetary obligations.
- Nairametrics earlier reported that the Federal Government raised over N346.155 billion at its November 2024 bond auction, reflecting higher allotments despite a reduction in the amount offered.
- The auction, conducted by the Debt Management Office (DMO) on November 18, 2024, featured reopenings of the 19.30% FGN APR 2029 (5-Year Bond) and the 18.50% FGN FEB 2031 (7-Year Bond).
Compared to October, the November auction saw a 33.33% reduction in the total amount offered.
The DMO placed N60 billion on offer for each bond, a drop from N90 billion in October. Despite the lower offerings, total allotments rose significantly, climbing by 19.50% to N346.155 billion from N289.597 billion in October.
For the 5-year Bond, N63.530 billion was allotted, while the 7-year Bond recorded an allotment of N282.625 billion. In contrast, the October auction allotted N57.237 billion and N232.360 billion for the 5-year and 7-Year Bonds, respectively.
Also, investor interest far exceeded expectations, with total bids amounting to N369.585 billion—a 208% subscription rate. This oversubscription highlights the market’s appetite for fixed-income instruments amid evolving macroeconomic conditions.
