The Debt Management Office of Nigeria (DMO) has on behalf of the federal government of Nigeria, offered for subscription by auction 3 Federal Government of Nigeria (FGN) reopened Bond. The first is a 10-Year FGN bond at a 13.53 percent interest rate due March 2025. It also reopened for subscription to another 10-year FGN bond at 12.50 percent due April 2032. In the issuance also is a 20-Year FGN Bond reopening at a 16.2499 percent interest rate which would be due in April 2037.
As disclosed by DMO in a publication on its website, the bond Auction date is September 19, 2022, with a settlement date slated for September 21, 2022.
The offer comes at N1000 per unit price subject to a minimum subscription of N50, 001,000 and in multiples of N1000 thereafter. The DMO did not specify a subscription ceiling for these re-openings.
According to DMO, Re-openings of previously issued bonds (where the coupon is already set), will require successful bidders to pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus any accrued interest on the instrument.
Additionally, interest on the bond is payable semi-annually with a bullet repayment of principal at the maturity of the bond.
DMO stated that the bond “qualifies as securities in which trustees can invest under the Trustee Investment Act.”
“Qualifies 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.”
“Listed on The Nigerian Stock Exchange Limited and FMDQ OTC Securities Exchange.”
‘’Qualifies as a liquid asset for liquidity ratio calculation for banks.”
The DMO also said that the bond is backed by the full faith and credit of the Federal Government of Nigeria and charged upon the general assets of Nigeria. Meaning it is a credit-worthy bond and therefore free from credit risk on the part of the investor.
Interested investors are required to contact the offices of any of the Primary Dealer Market Makers (PDMMs) as provided in the publication.
What You Need to Know
A bullet bond is a type of bond which has a one-time repayment of principal occurring at its maturity. What this means is that the redemption of the principal by an investor will only be possible at the maturity of the debt instrument. However, according to the DMO, interest will be accrued quarterly.
Sovereign government bonds are generally free from credit risk as they are backed by the full faith of the government.