The federal government, through the Debt Management Office (DMO) has, so far, raised and listed on the Nigerian Exchange (NGX) a sum of N3.510 trillion Bond instruments.
The Debt Management Office (DMO) reported a significant turnout with hundreds of investors participating, underscoring a strong confidence in the stability and returns of government-backed securities.
The money raised by FG from these Bonds, which comprise of FGN Monthly Bonds, Sukuk Bonds and FGN Savings Bond, allows the federal government to meet its immediate financial needs with repayment done at bond maturity in addition with yields.
The Bonds, during the period under review, have been listed on the Nigerian Exchange platform. The FGN Bonds was designed to offer attractive returns and low risk investment avenue to low-income earners. It was also aimed at deepening the national savings culture and providing opportunity to all citizens irrespective of income level to contribute to National Development.
The federal government through Debt Management Office (DMO) has been issuing FGN Savings Bonds on a monthly basis in tenors of two and three years with quarterly payment of coupons (interest) at a rate predetermined and published by the DMO every month.
The minimum subscription amount is N5,000.00 and investment must be in multiples of N1,000.00 while the maximum investment amount is N50 million. Investors are required to subscribe through stockbroking firms trading on the floor of the NGX and accredited by the DMO to act as distribution agents.
Detail of the Bonds as contained in the NGX X-Compliance report revealed that, from January to April, FGN Savings bonds listed on NGX valued at N11.564 billion. The monthly FGN bond auction listed on the NGX during this period amounted to N3.148 trillion, and N350 billion on sukuk bonds.
Speaking on this, the vice president, Highcap Securities Limited, David Adnori stated that, bonds by federal government are oversubscribed over current liquidity surplus in the financial system, stressing that institutional investors continually look for new avenues to invest funds from maturing securities, coupons and dividend receipts, and new AUMs generated.
According to him, “this is in addition to the fact that FGN bonds are essentially risk-free. Notably, Nigerian pension funds are willing takers of FGN debt. Nigerian pension funds have historically favoured government debt as an asset class due to the paucity of good quality investable securities available to them. Other related reasons include the relative lack of depth of the equities market, portfolio safety considerations, and strict investment guidelines by the industry regulator.”
Managing director/CEO, Sofunix Investment & Communications, Sola Oni said, “We must appreciate that the philosophy of the FGN Savings Bond transcends the economics of capital mobilisation. The bond offering is targeted at low-income earners as a way of encouraging savings culture. At the commencement of the programme, there was intensive publicity and this enhanced patronage.”
He, however, said uncompetitive yields, compared to other asset classes in fixed income securities, became an obstacle. For instance, the yield on Treasury Bill became more profitable.
Also, a senior stockbroker, Tunde Oyediran, stated that there is an increase in investors’ appetite towards the instrument as seen in the month of April.
He noted that this successful bond issuance is a clear indicator of the healthy investor appetite for Nigerian sovereign debt, reflecting trust in the nation’s fiscal management and economic policies.
“Moreover, the high participation rates and significant allotments serve as a robust indicator of the market’s liquidity and investor confidence in the stability of Nigeria’s financial instruments. For individual and institutional investors, this development signifies a valuable opportunity to lock in attractive interest rates with government-backed security,” he added.
He also observed that investing in FGN Saving Bond not only offers favourable returns but also provides a safe investment avenue, contributing to funding national development projects.
The chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion noted that the subscription to FBN Saving Bond is a lucrative investment, stressing that the low risk involved attracted investors.
He added that, “anything sovereign has the lowest risk and nothing will go wrong with it except the country is collapsing completely. All over the world, sovereign bonds have the lowest risk and secondly it is an investment outlet for investors to invest their money.”
In creating more awareness of the benefits of FGN Savings Bonds to the investing public, especially the retail segment of the market, Nigerian Exchange said this would encourage participation in investments and further enhance financial inclusion in the country.