The Federal Government of Nigeria (FGN) has officially launched a $500 million domestic dollar bond, opening it for subscription on August 19, 2024. This bond, which carries an annual interest rate of 9.75%, is scheduled to mature in 2029, offering a five-year investment opportunity.
Key Details of the Bond Offering
The bond issuance is a significant component of Nigeria’s financial strategy, providing a stable investment opportunity for both domestic and international investors. It is structured with semi-annual coupon payments, allowing investors to receive regular income throughout the investment period.
Investors can participate with a minimum purchase of $10,000, equivalent to 10 units of the bond, with subsequent investments available in multiples of $1,000. The bond will be redeemed in full at the end of its five-year term, ensuring that investors receive their principal back upon maturity.
Broad Investor Appeal
This bond is accessible to a diverse group of investors, including Nigerian residents, individuals with offshore savings, members of the Nigerian diaspora, and Qualified Institutional Investors. Its qualification as a security under several legal frameworks, such as the Trustee Investment Act and the Pension Reform Act, makes it a viable option for trustees and Pension Fund Administrators. Additionally, it offers tax exemption benefits under the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA) for pension funds.
Strategic Implications
The issuance of this bond is part of a broader strategy by the Nigerian government to tap into both domestic and diaspora investments, providing a secure and attractive investment vehicle backed by the full faith and credit of the Federal Government. The bond will be listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange Limited, enhancing its liquidity and accessibility to a wide range of investors.
Management and Distribution
United Capital Plc serves as the lead issuing house and coordinator for this bond, supported by Meristem Capital Limited, Stanbic IBTC Capital Limited, and Vetiva Advisory Services Limited as co-issuers. A network of primary dealer market makers and receiving banks, including Access Bank Plc, Citibank Nigeria Ltd., and Guaranty Trust Bank Ltd., will facilitate the bond’s distribution.
Economic Impact
The bond issuance is expected to bolster Nigeria’s external reserves and help stabilize the country’s foreign exchange market. The Federal Government aims to raise $500 million through this initial offering, with aspirations to double the amount to $1 billion in total subscriptions. The auction for this bond will close on August 30, 2024, with the settlement date set for September 6, 2024, when investors will officially confirm their purchases and begin accruing interest.
This bond represents a critical step in Nigeria’s efforts to strengthen its financial position and offers a robust opportunity for investors seeking a secure and profitable investment in the country.
