By Dipo Olowookere
On Wednesday, June 17, 2020, the Nigerian government will auction its bonds worth N150 billion to diverse investors at the local debt market.
The exercise is the monthly FGN bond sale usually conducted and tomorrow, the auction would be carried out by the Central Bank of Nigeria (CBN) for the Debt Management Office (DMO).
The apex bank will be selling N40 billion worth of the 5-year notes maturing in 2023 with a coupon rate of 12.75 percent, N50 billion worth of the 15-year papers maturing in 2035 with a coupon rate of 12.50 percent, and N60 billion worth of the 30-year instruments maturing in 2050 with a coupon rate of 12.98 percent.
Business Post reports that all the tenors are re-opening and the settlement date fixed for Friday, June 19, 2020.
According to the circular released by the DMO, subscribers would be expected to pay N1,000 per unit subject to a minimum subscription of N10,000 and in multiples of N1,000 thereafter.
For the interest rate, especially for the re-openings of previously issued bonds, (where the coupon is already set), successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus accrued interest from the original issue date.
The debt office further said the interest would be paid semi-annually to holders of the notes, while the full-face value of the papers acquired by investors would be paid on the maturity date.
The FGN bonds qualify as securities in which trustees can invest under the Trustee Investment Act. They also qualify as government securities within the meaning of Company Income Tax Act (CITA) and Personal Income Tax Act (PITA) for Tax Exemption for Pension Funds amongst other investors.
After issuance, the papers will be listed on the trading platform of the Nigerian Stock Exchange (NSE), while all FGN Bonds qualify as liquid assets for liquidity ratio calculation for banks.
The FGN Bonds are backed by the full faith and credit of the Federal Government of Nigeria and are charged upon the general assets of Nigeria.
According to the DMO, interested investors should get in touch with the underlisted primary dealer market makers;
Access Bank Plc, First Bank of Nigeria Ltd, Standard Chartered Bank Nigeria Ltd, Citibank Nigeria Ltd, First City Monument Bank Plc, United Bank for Africa Plc, Coronation Merchant Bank Ltd, FSDH Merchant Bank Ltd, Zenith Bank Plc, Ecobank Nigeria Ltd, Guaranty Trust Bank Plc, FBNQuest Merchant Bank Ltd and Stanbic IBTC Bank Plc.
Adedapo Adesanya