FG to Auction ₦120B Bonds: What You Need to Know!
The Federal Government of Nigeria is set to raise ₦120 billion through the auction of two savings bonds today. This amount marks a significant 33.3% drop compared to the ₦180 billion raised in October, highlighting a slowdown in bond offerings.
Key Details of the Auction
1. Bond Offerings:
Two re-openings of existing bonds:
19.3% FGN APR 2029 (five-year bond).
18.5% FGN FEB 2031 (seven-year bond).
Each bond is valued at ₦60 billion, with a minimum subscription of ₦50,001,000 in multiples of ₦1,000.
2. Attractive Coupon Rates:
The bonds' high yields reflect the current market environment, making them attractive to institutional investors, pension funds, and trustees.
Tax Benefits: These bonds are exempted from Company Income Tax (CITA) and Personal Income Tax (PITA).
3. Settlement Date:
Successful bidders will finalize transactions on November 20, 2024.
Implications of Domestic Debt
Dominance of FGN Bonds:
FGN bonds represent ₦52.315 trillion or 78.13% of the domestic debt stock as of June 2024.
Concerns from Experts:
Crowding Out Private Investments: The aggressive borrowing taps into private savings that could otherwise fund private sector projects.
High Debt Servicing Costs: Domestic interest rates are often higher than foreign rates, consuming a significant portion of government revenues.
Investor Outlook
Despite these concerns, the bonds are expected to attract strong investor interest due to their competitive coupon rates and tax exemptions. Analysts note that these bonds remain a secure investment choice for institutional players navigating Nigeria’s high-yield environment.
What’s Next?
With this auction, the Federal Government continues its strategy to finance budgetary needs through domestic borrowing. Investors are urged to evaluate these bonds as part of their portfolio, given the favorable yields and tax incentives.
The Federal Government of Nigeria is set to raise ₦120 billion through the auction of two savings bonds today. This amount marks a significant 33.3% drop compared to the ₦180 billion raised in October, highlighting a slowdown in bond offerings.
Key Details of the Auction
1. Bond Offerings:
Two re-openings of existing bonds:
19.3% FGN APR 2029 (five-year bond).
18.5% FGN FEB 2031 (seven-year bond).
Each bond is valued at ₦60 billion, with a minimum subscription of ₦50,001,000 in multiples of ₦1,000.
2. Attractive Coupon Rates:
The bonds' high yields reflect the current market environment, making them attractive to institutional investors, pension funds, and trustees.
Tax Benefits: These bonds are exempted from Company Income Tax (CITA) and Personal Income Tax (PITA).
3. Settlement Date:
Successful bidders will finalize transactions on November 20, 2024.
Implications of Domestic Debt
Dominance of FGN Bonds:
FGN bonds represent ₦52.315 trillion or 78.13% of the domestic debt stock as of June 2024.
Concerns from Experts:
Crowding Out Private Investments: The aggressive borrowing taps into private savings that could otherwise fund private sector projects.
High Debt Servicing Costs: Domestic interest rates are often higher than foreign rates, consuming a significant portion of government revenues.
Investor Outlook
Despite these concerns, the bonds are expected to attract strong investor interest due to their competitive coupon rates and tax exemptions. Analysts note that these bonds remain a secure investment choice for institutional players navigating Nigeria’s high-yield environment.
What’s Next?
With this auction, the Federal Government continues its strategy to finance budgetary needs through domestic borrowing. Investors are urged to evaluate these bonds as part of their portfolio, given the favorable yields and tax incentives.