Federal Government Raises N1.5 Trillion in Two FGN Bond

The Federal Government reported raising N1.5 trillion through bonds at its February auction instead of its earlier target of N2.5 trillion.

The Debt Management Office released this on Tuesday, stating that the 2031 bond had a total allotment of N873.53bn while that of the 2034 bond stood at N621.38bn.

The Federal Government proposed last week that it will borrow N2.5 trillion via bonds; this is said to be the second time the government is approaching the fixed-income market this year.

It stated that the offerings consisted of N1.25tn with a maturity date of February 2031 and N1.25tn with a 10-year tenure.

Both newly created bonds are offered at a unit price of N1,000, with a minimum subscription requirement of N50,00,000 and subsequent increments in multiples of N1,000. The PUNCH reported that interest payments on FGN bonds are made semi-annually (twice a year).

The part of the statement read, 

In an unprecedented development, the Debt Management Office raised N1.495 trillion in Federal Government of Nigeria bonds at its monthly auction for February 2024.

The DMO offered an N1.25tn 7-year FGN bond maturing in 2031 and another N1.25tn 10-year FGN bond maturing in 2034. The DMO received total bids of N1.9tn for the offer, making it the highest it received in any FGN Securities Auction.

It stated that at the close of the auction, N873.53bn was allotted for the 2031 FGN bond and N621.38bn for the 2034 FGN bond, making a total allotment of N1.495tn.

“The relatively large amount on offer was based on the FGN’s financing need, the opportunity to attract foreign investors, and the premise that some local investors may be able to access pools of funds.”

In January, the DMO offered four 10-year reopened bonds totalling N360bn. According to the results, FG raised about N418.197bn from the four auctioned bonds.

Back Story

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

The federal government stated 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.

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.