The Federal Government of Nigeria (FGN), through the Debt Management Office (DMO), has disclosed plans to generate N450 billion through its January 2025 bond auction.
Nairametrics observed that this figure is higher than the N360 billion offered in January 2024 and the N120 billion offered last month in December of last year.
This initiative aims to bridge the fiscal deficit and address the government’s financial obligations while providing investment opportunities for institutional and individual investors.
The first FGN bond auction this year features both reopened and new bond issuances, catering to diverse investor interests.
Breakdown of the offer
- The January 2025 bond auction includes three categories of bonds. The first is a five-year bond with a 19.30% coupon rate, originally issued in April 2029, and the government plans to raise N100 billion from this reopening.
- The second offering is a seven-year bond, first issued in February 2031, with an 18.50% coupon rate, through which the government aims to secure N150 billion.
- Lastly, the auction includes a new issuance of a ten-year bond, the FGN January 2035 bond, targeting N200 billion. These bonds collectively form a substantial component of the government’s domestic borrowing strategy.
The auction will take place on January 27, 2025, with a settlement date of January 29, 2025. The settlement ensures that successful bidders gain ownership of the bonds shortly after the auction date, enabling them to start earning interest promptly.
Key features of the bonds
These bonds are available in units of N1,000, with a minimum subscription requirement of N50,001,000. Investors may increase their subscriptions in increments of N1,000.
The bonds offer semi-annual interest payments, ensuring consistent income streams for holders. Additionally, the bonds will be redeemed in full at maturity, providing a lump-sum repayment to investors.
The bonds also come with significant tax benefits. They qualify for tax exemptions for pension funds and other approved investors under the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA).
Moreover, they are listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange, enhancing their accessibility and tradability. For financial institutions, these bonds are recognised as liquid assets and can be used to meet liquidity ratio requirements.
The bonds are backed by the full faith and credit of the Federal Government of Nigeria. This guarantee, charged upon the general assets of the country, reinforces their appeal as a secure investment vehicle. The credibility of the issuer, combined with the reliability of regular interest payments, positions these bonds as an attractive option for investors seeking low-risk, fixed-income assets.
How to subscribe
The DMO has made provisions for interested investors to participate in the bond auction through authorised Primary Dealer Market Makers (PDMMs).
These institutions, including leading financial entities such as Access Bank Plc, Zenith Bank Plc, Stanbic IBTC Bank Ltd, and United Bank for Africa Plc, among others, will facilitate subscriptions for the bonds. Prospective investors are encouraged to liaise with these PDMMs for guidance on the subscription process.
What you should know
- This bond issuance highlights the federal government’s commitment to leveraging the domestic debt market to meet its funding needs amidst global economic uncertainties.
- With competitive yields, tax exemptions, and high security, the bonds are expected to attract significant interest from investors, particularly those seeking stable and predictable returns.
- Nairametrics earlier reported that the Federal Government of Nigeria is planning to raise not more than N1.8 trillion from the bond market in the first quarter of 2025, according to the Debt Management Office (DMO).
- The issuance, outlined in the newly released FGN Bond Issuance Calendar, highlights a mix of re-opened and new bonds across three monthly auctions scheduled for January, February, and March 2025.
- This funding effort is part of the government’s strategy to address fiscal deficits and fund critical infrastructure.
