Federal Government of Nigeria Propose 12% Annual Interest on Sovereign Retail Bonds

The federal government has announced that it will offer retail investors a 12% annual return on their investments in government sovereign retail bonds.

The federal government said it will offer the first debt issuance in 2024 tranches of its monthly retail bond issuance, also called the Federal Government of Nigeria Savings Bond (FGNSB).

The Debt Management Office (DMO), in charge of government debt issuance and management, offers two tranches of FGNSBs with two-year and three-year tenors. The January 2024 issuance is the 79th tranche of the savings bond, introduced in 2017.   

The government said it will offer a two-year sovereign retail bond with a bonanza of 11.033% with maturity on January 17, 2026.

It will also offer three-year FGNSBs at a coupon of 12.033%, with maturity on January 17, 2027.

According to a report, the minimum subscription to the pro-low saver bonds is N5,000, with the maximum subscription per subscriber at N50 million. The bond application list will close tomorrow,  Friday, January 12, 2024, with a settlement date on Wednesday, January 17, 2024.

The FGNSBs are designed to have most of the features of the existing sovereign bond but with other benefits to the bondholder, including a low minimum subscription, listing on the stock exchange and trading on the bonds.

It will also be backed by the Federal Government of Nigeria, which makes it risk-free.

The coupon is paid quarterly, providing investors with a regular income stream. The coupon payment dates for the bonds being issued are April 17, July 17, October 17, and January 17.   

The FGNSB was introduced in 2017 as a mass instrument for the nationwide mobilisation of savings and investments. The minimum subscription to the FGNSB is usually N5,000, while the bond pays coupons or interest rates quarterly.

Usually, the minimum subscription to the bonds, offered at N1,000 per unit, is N5,000 or five units and in multiples of N1,000 after that, subject to a maximum subscription of N50 million.

The bonds are usually listed on the stock exchange for trading, providing liquidity for investors who want to exit before maturity.