The Federal Government has reopened three bonds worth a combined N1.1 trillion for subscription. This comes as it prepares for its August FGN bond auction.
According to the News Agency of Nigeria, the Debt Management Office announced the offer on Thursday in Abuja. The three instruments carry different maturities and coupon rates.
The largest portion is the 15.45 per cent FGN June 2038 bond, a 15-year reopening valued at N750 billion. Meanwhile, the government is also offering N250 billion of the 22.60 per cent FGN January 2035 bond. In addition, N100 billion of the 16.2499 per cent FGN April 2037 bond is available.
FGN bond auction set for August 17
The DMO fixed the auction for August 17, while successful transactions will settle on August 19.
Each bond will be offered at N1,000 per unit. There is a minimum subscription of N50.001 million, and additional investments are made in multiples of N1,000.
Explaining how successful bids will be priced, the DMO said previously issued bonds already have their coupon rates fixed.
“For 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, they will pay any accrued interest,” it said.
Interest on the bonds will be paid twice yearly. Investors will receive the principal through a bullet repayment when each instrument reaches maturity.
DMO outlines security for investors
The DMO said the bonds are backed by the full faith and credit of the Federal Government. They are charged against Nigeria’s general assets.
It added that the instruments qualify as securities available to trustees under the Trustee Investment Act. Furthermore, they qualify as government securities under relevant tax laws.
The bonds are also listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange. Banks can count them as liquid assets when calculating their liquidity ratios.
FGN bonds are debt instruments through which investors lend money to the Federal Government for an agreed period. In return, the government pays periodic interest before returning the principal at maturity.
The primary auctions are largely structured for institutional investors and individuals with substantial capital. This includes pension fund administrators, banks, insurance companies, asset managers and corporate treasury desks.
The latest offer gives investors another opportunity to participate in Federal Government debt instruments. Additionally, it provides the government with funds through the domestic capital market.
