As the third FGN bond sale in coming up in March 18, 2024, the Federal Government hopes to borrow N450 billion, this is as per the most recent Debt Management Office (DMO) circular.
Compared to the N2.5 trillion objective from the same bond sale the previous month, this amount is 82% lower.
The settlement date is March 20, 2024, while the auction is scheduled on March 18, 2024.
The offer comprises three separate bonds, according to the DMO’s circular: reopenings of the 18.50% FGN February 2031 and the 19.00% FGN February 2034 bonds, as well as a new 3-year bond for March 2027.
The government’s monthly borrowing plan of N450 billion includes an allocation of N150 billion for each bond.
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Investors will purchase these bonds at a price corresponding to the yield-to-maturity bid that clears the auction volume and any accrued interest.
These bonds, being crucial instruments for the government’s debt management strategy, serve multiple purposes, including providing investors with a relatively safe investment option, assisting in managing the country’s debt profile, and facilitating efficient fund management.
The offer states that the units of sale will be at N1,000 per unit, with a minimum subscription of N50,001,000, and subsequent subscriptions in multiples of N1,000. The interest on these bonds is payable semi-annually until maturity, where a bullet repayment is scheduled.
Notably, the FGN bonds carry the full faith and credit of the Federal Government of Nigeria, making them a secure investment. They are charged upon the general assets of Nigeria and are listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange.
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Also, these bonds qualify as securities in which trustees can invest under the Trustee Investment Act, are recognised as government securities within the meaning of Company Income Tax Act (CITA) and Personal Income Tax Act (PITA) and qualify as liquid assets for the calculation of liquidity ratio for banks.
In 2023, the Federal Government raised about N5.49 trillion through FGN bond auctions which were used to finance the 2023 budget deficit of N11.34 trillion.
In January 2024, the Federal Government raised about N418.197 billion from the four bonds that were auctioned.
The Federal Government in February 2024 realised N1.49 trillion from the two FGN bond offer issued by the DMO below the target of N2.5 trillion.
With the budget deficit in the 2024 budget put at N9.18 trillion, the Federal Government seems committed to borrowing more from the domestic market.
