The Federal Government of Nigeria (FGN), through the Debt Management Office (DMO), has announced an offer for subscription by auction, aiming to raise N350 billion through the issuance of Federal Government Bonds.
This amount is less than a total of N450 billion offered in the previous month during the January 2025 FGN bond auction.
The auction, scheduled to take place on February 24, 2025, will consist of the reopening of two previously issued bonds.
These include the 19.30% FGN April 2029 bond, with a total offer size of N200 billion, and the 18.50% FGN February 2031 bond, with a total offer size of N150 billion. The settlement date for successful bids is set for February 26, 2025.
This issuance is part of the government’s ongoing strategy to raise long-term funds to support national expenditure and stimulate economic development.
By reopening these bonds, the government provides investors with another opportunity to participate in a secure and structured investment vehicle while managing its debt obligations efficiently.
Offer details and subscription terms
- The bonds are being offered in units of N1,000, with a minimum subscription requirement of N50,001,000 and subsequent investments required to be in multiples of N1,000. Since these are reopenings of existing bonds, the coupon rates remain fixed at 19.30% for the 5-year bond maturing in April 2029 and 18.50% for the 7-year bond maturing in February 2031.
- However, the actual price paid by successful bidders will depend on the yield-to-maturity bid that clears the auction volume. Investors will also be required to pay any accrued interest on the bonds from the last coupon payment date up to the settlement date.
- Interest payments for both bonds will be made semi-annually, ensuring investors receive regular returns throughout the life of the bonds. Upon maturity, the principal amount will be repaid in full through a bullet repayment, meaning investors will receive the total face value of their bond investments at once, rather than in installments.
Investor benefits and security
The bonds qualify as government securities under Nigerian tax laws, making them attractive to a wide range of investors. Under the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA), these bonds are eligible for tax exemptions for pension funds and other qualified institutional investors.
This tax advantage enhances the appeal of FGN Bonds, particularly for long-term investors seeking stable returns with minimal tax liabilities.
- In addition to their tax benefits, the bonds qualify as securities in which trustees can invest under the Trustee Investment Act.
- This classification allows pension funds, insurance companies, and other institutional investors to allocate funds to these instruments with confidence in their security.
- Furthermore, the bonds are listed on the Nigerian Exchange Limited (NGX) and the FMDQ OTC Securities Exchange, providing liquidity for investors who may wish to trade their holdings in the secondary market.
- For the banking sector, all FGN bonds qualify as liquid assets for liquidity ratio calculations. This means that commercial banks can use these bonds to meet regulatory liquidity requirements, reinforcing their balance sheets while earning interest income.
- Also, the bonds are backed by the full faith and credit of the Federal Government of Nigeria and are secured against the general assets of the country.
This backing ensures that investors face minimal credit risk, as the government is obligated to honor both interest payments and principal repayment upon maturity.
Investors interested in participating in this bond auction can do so through any of the Primary Dealer Market Makers (PDMMs) authorized by the DMO.
These include major financial institutions such as Access Bank, First Bank of Nigeria, Stanbic IBTC Bank, Citibank Nigeria, Guaranty Trust Bank, Zenith Bank, and several others.
These institutions act as intermediaries, facilitating investor participation in the auction process.
