The Federal Government of Nigeria, through its Debt Management Office (DMO), has announced plans to raise N190 billion from the bond market in August 2024.
Marking its lowest bond offer in 2024, this offer amount is 37% less than the N300 billion offered last month.
The bond offer will be conducted by auction on August 19, 2024, featuring three different re-openings, each with distinct maturity dates and interest rates, providing a variety of options for potential investors.
Breakdown of the bond offer
The August 2024 FGN Bond Offer Circular outlines that the DMO will be reopening three previously issued bonds as part of its strategy to raise N190 billion from the bond market.
These bonds, which were originally issued in earlier years, are being offered to investors once again under attractive terms designed to ensure strong participation.
- The bonds include a N70 billion reopening of the 19.30% FGN APR 2029, a 5-year bond that will mature in April 2029.
- Also, the DMO is offering another N70 billion through the 18.50% FGN FEB 2031 bond, which is a 7-year instrument maturing in February 2031.
- The third bond in the offering is the 19.89% FGN MAY 2033, a 9-year bond with a reopening value of N50 billion, set to mature in May 2033.
Although past bond auctions revealed a shift in investor preferences towards higher-yielding and longer-tenor bonds, amidst a backdrop of cautious market sentiment, the government offered a lower amount for the longer-tenor bond.
These bonds, known for their competitive interest rates, are expected to attract significant interest from investors looking for stable, long-term returns in the Nigerian bond market.
These bonds, which are being offered in units of N1,000, require a minimum subscription of N50,001,000, with increments in multiples of N1,000 thereafter.
What you should know
The bonds will provide semi-annual interest payments, with bullet repayment scheduled for the respective maturity dates. They are fully backed by the full faith and credit of the Federal Government of Nigeria and are secured upon the general assets of the country, reinforcing their appeal to a wide range of investors.
The auction, which will be conducted by the DMO on August 19, 2024, with a settlement date of August 21, 2024, will see the bonds listed on both the Nigerian Exchange Limited and FMDQ OTC Securities Exchange.
These bonds also qualify as securities in which trustees can invest under the Trustee Investment Act. Moreover, they are recognized as government securities under both the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA), making them exempt from certain taxes, which is an attractive feature for pension funds and other institutional investors.
The relatively lower offer size of N190 billion, compared to previous offers in 2024, reflects the government’s cautious approach in the face of declining demand for the bonds.
The primary objective of this bond offer is to raise substantial capital to support the government’s fiscal policies and infrastructure development.
By issuing these bonds, the FGN aims to attract both local and international investors, thereby increasing the financial inflow into the country’s economy.
These funds are crucial for financing key projects in sectors such as transportation, healthcare, education, and power.
Moreover, the raised capital will help the government meet its budgetary commitments and reduce the reliance on external borrowing, which often comes with stringent conditions and higher interest rates.