In a bid to bridge the 2024 budget deficit, the federal government is targeting N150 billion from the bond market in September 2024.
The auction by the Debt Management Office (DMO) is scheduled for September 23, 2024 and will be settled on September 25, 2024 and it represents one of the smallest bond offers in 2024 as it is about 21% lower than the amount N190 billion offered in August 2024.
The bonds on offer are re-openings of previously issued instruments. They include a N70 billion tranche of the 19.30% FGN APR 2029 (5-year bond), a N50 billion tranche of the 18.50% FGN FEB 2031 (7-year bond), and a N30 billion tranche of the 19.89% FGN MAY 2033 (9-year bond).
The total offering of N150 billion, though smaller than earlier offers in the year, reflects the government’s measured approach to borrowing in light of its financial needs and weakening demand.
The bonds will be sold in units of N1,000 each, with a minimum subscription of N50,001,000 and in multiples of N1,000 thereafter.
This relatively high threshold is designed to attract institutional investors such as pension funds, insurance companies, and other large-scale financial institutions, though high-net-worth individuals are also able to participate.
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The bonds carry competitive interest rates with coupon payments of 19.30%, 18.50%, and 19.89% for the 5-year, 7-year, and 9-year bonds respectively, making them attractive for yield-seeking investors.
Given the maturity periods of 5, 7, and 9 years, these bonds offer investors options for medium to long-term investment horizons.
The settlement date for the Federal Government of Nigeria’s (FGN) bond auction is scheduled for September 25, 2024. This is the date when successful bidders will make payment for the bonds they are allocated and will officially receive their bond certificates.
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 bonds are also listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange, providing investors with liquidity through potential secondary market trading. Also, they qualify as securities that trustees can invest in under the Trustee Investment Act and are classified as liquid assets for banks under the liquidity ratio requirements.
By: Babajide Okeowo
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