The Federal Government of Nigeria has announced that investors interested in its newly issued $500 million domestic dollar bond must provide specific identification details as part of the subscription process. This requirement is detailed in a Frequently Asked Questions (FAQ) document released by the Debt Management Office (DMO) on its official website.
To participate in the bond offering, all Nigerian citizens, including those living abroad, must possess both a Bank Verification Number (BVN) and a National Identification Number (NIN). The bond, which is the first tranche of a broader $2 billion financial program, was made available on Monday and is aimed at attracting both local and foreign investments.
Eligible participants for this bond include Nigerians residing within the country, those in the diaspora with foreign exchange savings, and foreign institutional investors. The DMO’s FAQ explicitly states, “A BVN and NIN are required for subscription. Nigerians in the diaspora can apply for both BVN and NIN if they don’t already have them.”
Additionally, the government has stipulated that subscriptions to the Domestic FGN US Dollar Bond cannot be made using cash. Instead, all payments must be made through electronic transfers into designated accounts. The FAQ further clarifies that these subscriptions can be made either electronically or through financial institutions. For those intending to use balances in their domiciliary accounts, the funds must have been in the account for at least 30 days prior to the application date.
The funds raised from this bond issuance will be directed towards financing critical sectors of the Nigerian economy, as approved by the President, based on recommendations from the Minister of Finance and Coordinating Minister of the Economy. The bond carries a 9.75% annual coupon rate over a five-year period and is open to both domestic and international investors, with a minimum subscription amount of $10,000.
This bond differs from traditional Eurobonds primarily in its accessibility, requiring a lower entry threshold of $10,000 compared to the typical $200,000 needed for Eurobonds. It is also recognized by the Central Bank of Nigeria as a liquid asset, making it eligible for inclusion in banks’ liquidity ratio calculations and suitable for pension fund portfolios.
One of the bond’s key attractions is its tax-exempt status. According to the DMO, income derived from these bonds is exempt from Companies Income Tax, Personal Income Tax, and Capital Gains Tax, making it an appealing investment opportunity. Moreover, the bonds will be listed on the Nigerian Exchange Limited and the FMDQ Securities Exchange Limited, providing investors with liquidity options before the bond matures.
The bond auction will remain open until August 30, 2024, offering investors ample time to participate. The settlement date, when purchases will be confirmed and interest will start accruing, is set for September 6, 2024.
Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, has previously stated that the $500 million domestic dollar bond is expected to boost Nigeria’s external reserves and contribute to stabilizing the foreign exchange market.