By Dipo Olowookere
On Wednesday, June 23, 2021, the Debt Management Office (DMO) will auction the Federal Government of Nigeria (FGN) bonds worth N150 billion to investors.
The Naira-denominated papers would be offered for sale in three different tenors of 10 years, 15 years and 30 years, all re-opening.
In a circular issued by the DMO, it was disclosed that N50 billion worth of the 10-year FGN bond would be put up for sale.
Also, another N50 billion worth of the 15-year bond would be auctioned, while the 30-year paper will have N50 billion worth up for grabs.
The debt office disclosed that 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 any accrued interest on the instrument.
The agency further said investors willing to participate in the N150 billion FGN bond sale would be required to buy the notes at the rate of N1,000 per unit subject to a minimum subscription of N50 million and in multiples of N1,000 thereafter.
To purchase them, investors would have to contact the primary dealer market makers (PDMM) like Access Bank, First Bank of Nigeria, Standard Chartered Bank Nigeria, Citibank Nigeria, FCMB, UBA, Coronation Merchant Bank, FSDH Merchant Bank, Zenith Bank, Ecobank Nigeria, GTBank, FBNQuest Merchant Bank and Stanbic IBTC Bank.
The FGN bond is backed by the full faith and credit of the federal government of Nigeria and is charged upon the general assets of the country.
The benefit of investing in this fixed income asset is that it qualifies as securities in which trustees can invest under the Trustee Investment Act.
In addition, the paper is tax-free as it can be used as government securities within the meaning of the Company Income Tax Act (CITA) and Personal Income Tax Act (PITA) for tax exemption for pension funds amongst other investors.
All FGN bonds qualify as liquid assets for liquidity ratio calculation for banks and after the exercise, they are listed on the Nigerian Exchange (NGX) Limited and the FMDQ Securities Exchange.
Those who buy these bonds are paid their interest twice a year and at maturity, they receive their full payment, which is the initial amount invested in the debt securities.
