The Debt Management Office (DMO) announced the resumption of its Federal Government of Nigeria FGN Savings Bond Offer. The bond offer is said to take effect from August 10, 2020.
The Debt Management Office made the disclosure to the general public through a press statement.
Recall, that in Q2 2020 the Debt Management Office suspended operations regarding the monthly offers of the FGN Savings Bond. This was due to the lockdown and restrictions placed on social and economic activities as part of measures implemented by the government to curtail the spread of the COVID-19 pandemic.
According to the Debt Management Office: “The DMO wishes to announce the resumption of its offer of the federal government of Nigeria savings bond (FGN savings bond) effective August 2020.
The DMO was constrained to suspend the monthly offers of the FGN savings bond in April 2020 due to the restrictions on activities and movement as part of measures adopted by the government to curtail the spread of COVID-19. The offer for subscription will open on Monday, August 10, 2020, and close on Friday, August 14, 2020.’’
Investors are, however, encouraged to continue to save through the FGN Savings Bond. The FGN Savings Bonds attract good returns and are secure, being a sovereign instrument. Moreover, they have a positive impact on the economy and contribute to national development.
Recall, that on April 4, 2020, the suspension of the FGN Savings Bond offer by DMO which was scheduled for April 6 –April 10, due to the restrictions caused by the coronavirus pandemic took effect.
However, the DMO assured that the Bond offers were going to resume immediately restrictions ease down and things become a little bit normal.
Additionally, the Debt Management Office (DMO), noted that the suspension of the April 2020 Offer would not affect Coupon Payments due to investors for the already issued FGN Securities. However, arrangements have already been made towards ensuring that all Coupon Payments and redemptions of FGN Securities were made as and when due to investors’ designated accounts.
What To Know About FGN Bonds
FGN Bonds are debt securities (liabilities) of the Federal Government of Nigeria (FGN) issued by the Debt Management Office (DMO) for and on behalf of the Federal Government. The FGN has an obligation to pay the bondholder the principal and agreed interest as and when due.
When you buy FGN Bonds, you are lending to the FGN for a specified period of time. The FGN Bonds are considered the safest of all investments in the domestic debt market because it is backed by the ‘full faith and credit’ of the Federal Government, and as such it is classified as a risk-free debt instrument.
Why the Federal Government of Nigeria issue Bonds?
The Federal Government of Nigeria (FGN) issues Bonds for the following reasons:
• To finance government fiscal deficits in a non-inflationary and sustainable manner.
• To enhance the fiscal discipline of the Government.
• To refinance maturing debt obligations of the Federal Government.
• To establish a benchmark yield curve, this serves as a reference for pricing bonds issued by other bodies, especially the private sector issuers.
• To develop and ensure liquidity in the domestic bond market on a sustainable basis.
• To enhance and deepen the savings and investment opportunities of the populace.
• To sustain the development of other segments of the Bond market.
• To diversify government financing sources.
Features of FGN Bonds
- Denomination: minimum subscription of N10,000.00 + multiple of N1,000.00 thereafter.
- Yield: – Interest payment
- Fixed interest rates: Most FGN bonds have fixed interest rates which are paid semi-annually.
- Floating interest rates: Some FGN bonds (e.g. 3rd & 4th tranches of the 1st FGN bonds) have floating rates of interest which fluctuate around a reference rate(NTB rates) on the basis of specified parameters.
- There are also zero-coupon bonds (not yet in issue in Nigeria) whereby both interest and principal are repaid at the final maturity date of the bond.
- Tenor: Minimum of two (2) years. There are bonds with maturities of 3. 5, 7, and 10 years, in issue, and for the future, we may have bonds with maturities of 15, 20, 30 years or more.
- Default Risk: FGN bonds as a sovereign debt are the safest investment instrument. The default risk is nil. The Government always pays what is due to subscribers on the agreed date.
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