Budget Financing: DMO reopens four FGN bonds for investors at N360bn

*The Debt Management Office announces its reopening for subscription four Federal Government of Nigeria (FGN) bonds valued at N360 billion, noting the auction date is April 17 while the settlement date is April 19, 2023

Isola Moses | ConsumerConnect

The Debt Management Office (DMO) has said it reopened for subscription four Federal Government of Nigeria (FGN) bonds valued at N360 billion, as the Nigerian Government intensifies borrowing to bridge the budget deficit.

ConsumerConnect reports the DMO in a circular issued Wednesday, April 12, 2023, disclosed the auction date is April 17, and settlement date, April 19.

The first offer is a February 2028 FGN Bond valued at N90 billion, at interest rate of 13.98 per cent per annum (10-year re-opening), the DMO said.

The Offices also noted that the second offer is an April 2032 FGN Bond, valued at N90 billion, with an interest rate of 12.50 percent per annum (10-year re-opening).

The third offer is a January 2042 FGN Bond valued at N90 billion, with an interest rate of 13.00 percent per annum (20-year re-opening).

And the fourth offer is the March 2042 FGN Bond, also valued at N90 billion, at an interest rate of 12.98 per cent per annum (30-year re-opening), it said.

The Debt Office raises bonds to finance Federal Government’s budget deficit, as well as to refinance its maturing obligations during a fiscal year.

In January and February this year, the DMO had raised a total of N2.129 trillion from issuances of FGN bonds, Nigerian treasury bills, and FGN savings bonds.

It was gathered out of the sum, N1 trillion was deployed for deficit financing, which represented 14.2 percent of the total requirements of the N7,043 trillion deficit funding for this year.

On FGN Bonds

The FGN Bonds are debt securities (liabilities) issued by the Debt Office for and on behalf of the Federal Government, with obligation to pay the bond holder the principal and agreed interest as and when due.

In re-opening the bonds, the DMO has said, “For re-openings of previously issued bonds, successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned plus any accrued interest on the instrument.

“Interest is payable semi-annually, while bullet payment is made on maturity.”

Listed on the Nigerian Stock Exchange Limited and FMDQ Securities Exchange Limited, the bonds qualify as securities in which trustees could invest under the Trustee Investment Act.

The DMO stated: “They qualify as government securities within the meaning of Company Income Tax Act (CITA) and Personal Income Tax Act (PITA) for tax exemption for pension funds among other investors.”