Nigerian government announces September 2013 bond offer

The bonds will be issued in N1, 000 per unit, subject to a minimum subscription of N10, 000.

Nigeria’s Federal Government (FGN), through the Central Bank of Nigeria (CBN) and the Debt Management Office (DMO) has announced its September 2013 bond offer.

In an ‘offer-circular’ on the DMO’s website, the Federal Government announced its offer for subscription by auction and its authorisation to receive applications for N35 billion at 13.5 per cent (August 2016), three year re-opening and N35billion at 10 per cent (July 2030), 20-year re-opening.

“The Central Bank of Nigeria, on the authority of the Debt Management Office on behalf of the Federal Government of Nigeria offers for subscription by Auction and is authorised to receive applications for N35billion at 13.5 per cent (August 2016), three year re-opening and N35billion at 10 per cent (July 2030), 20-year re-opening,” the circular highlighted.

A government bond, otherwise known as debt security, is a bond issued by a national government, usually with a promise to pay periodic interest payments and to repay the face value on the maturity date. It is issued by a government to support government spending and is most often issued in the country’s domestic currency.

Government debt is money owed by any level of government and is backed by the full faith of the government. Before investing in government bonds, investors usually assess several risks associated with the country such as: country risk, political risk, inflation risk, and interest rate risk.

FGN bonds are Federal Government of Nigeria securities issued under the authority of Debt Management Office (DMO). Since 2003, DMO has been regulating the activities of the FGN bonds market, while the Central Bank of Nigeria acts as the Issuing House and the Registrar.

Summary of the offer

The Federal Government is the issuer of the bond. In terms of units of sale, the bonds will be issued in N1, 000 per unit, subject to a minimum subscription of N10, 000 and in multiples of N10, 000 and in multiples of N1, 000 thereafter.

On interest rate the Federal Government said “For Re-openings of previously issued bonds (where the coupon is already set) successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus accrued interest from the original issue date”. The interest Payment is payable semi-annually.

Interested investors were advised to contact some designated Primary Dealer Market Makers (PDMMs).

The bond’s auction date is September 11, 2013 and settlement date is September 13, 2013.

The status of the FGN bonds qualifies as securities in which trustees can invest under the Trustee Investment act. It also qualifies as government securities and is listed on the Nigerian stock Exchange. All Federal Government bonds qualify as liquid assets for liquidity ratio calculation for the banks and are backed by the full faith and credit of the Federal Government of Nigeria and are charged upon the general assets of Nigeria.


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