The Federal Government of Nigeria (FGN), through its Debt Management Office (DMO), has announced plans to raise N190 billion from the bond market this August. This bond offer is the smallest the government has made in 2024, marking a significant reduction from the N300 billion raised in July. The bond auction is scheduled for August 19, 2024.
The August bond offer will include three different bonds, each with its own maturity date and interest rate. These bonds are not new; they were originally issued in previous years and are now being offered to investors again under terms designed to attract strong participation.
According to the August 2024 FGN Bond Offer Circular, the DMO will reopen three previously issued bonds to raise the targeted N190 billion. The specific bonds being offered include:
1. N70 billion from the 19.30% FGN APR 2029 bond: This is a 5-year bond that will mature in April 2029.
2. N70 billion from the 18.50% FGN FEB 2031 bond: This is a 7-year bond that will mature in February 2031.
3. N50 billion from the 19.89% FGN MAY 2033 bond: This is a 9-year bond that will mature in May 2033.
These bonds, known for their competitive interest rates, are expected to attract significant interest from investors seeking stable, long-term returns. The bonds are being offered in units of N1,000, with a minimum subscription of N50,001,000. Additional purchases can be made in multiples of N1,000.
In previous bond auctions, there has been a noticeable shift in investor preferences towards bonds with higher yields and longer maturities. Despite this trend, the government is offering a smaller amount for the longer-tenor bond in this auction.
These bonds are expected to be attractive to a wide range of investors due to several key features. They offer semi-annual interest payments, and the principal will be repaid in full on the respective maturity dates. The bonds are backed by the full faith and credit of the Federal Government of Nigeria, making them a secure investment. They are also exempt from certain taxes under the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA), which makes them appealing to pension funds and other institutional investors.
The primary goal of this bond offer is to raise funds that will support the government’s fiscal policies and infrastructure projects. The funds raised from these bonds will be crucial for financing key projects in sectors such as transportation, healthcare, education, and power. Additionally, the capital raised will help the government meet its budgetary commitments and reduce its reliance on external borrowing, which often comes with higher interest rates and stricter conditions.
The auction will be conducted by the DMO on August 19, 2024, with a settlement date set for August 21, 2024. The bonds will be listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange, allowing for broad investor participation.
This bond offer represents a strategic move by the Nigerian government to secure funding for important national projects while offering investors a secure and potentially lucrative investment opportunity. Despite the smaller offer size, the government remains confident that these bonds will attract significant interest from both local and international investors.
