FGN Savings Bonds: Unveiling the November 2023 Offerings

The Debt Management Office [DMO] on behalf of the Federal Government of Nigeria Offers for Subscription and is authorised to receive applications for two Federal Government Of Nigeria Savings for November 2023 at the following interest rates:

• 2-Year FGN Savings Bond due November 15, 2025: 12.464% per annum
• 3-Year FGN Savings Bond due November 15, 2026: 13.464% per annum
  

SUMMARY OF THE OFFER

• Opening Date: November 6, 2023
• Closing Date: November 10, 2023
• Settlement Date: November 15, 2023
• Coupon Payment Dates: February 15, May 15, August 15, November 15

STATUS:

1. Qualifies as securities in which trustees can invest under the Trustee Investment Act.
2. Qualifies as government securities within the meaning of the Company Income Tax Act (“CITA”) and Personal Income Tax Act (“PITA”) for tax exemption for pension funds, amongst other investors.
3. Listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange.
4. All FGN bonds qualify as liquid assets for liquidity ratio calculation for bank

 Units of Sale:

• N1,000 per unit, subject to a minimum Subscription of N5,000 and in multiples of
• N1,000 thereafter, subject to a maximum subscription of N50,000,000.

INTEREST PAYMENT:

Payable Quarterly

REDEMPTION:

Bullet repayment on the maturity date

INTEREST RATE:

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 any accrued interest on the instrument.

 SECURITY:

Backed by the full faith and credit of the Federal Government of Nigeria and charged upon the general assets of Nigeria

Image Source: businesspost

The two bonds are:

1. FGN Savings Bond: This bond is a retail bond that is open to all Nigerian citizens and residents. It has a term of 3 years and an interest rate of 10.72% per annum. The investment window for this bond is now open and will close on Friday, 10, November 2023. You can invest between ₦5,000 and ₦50,000,000 (five thousand naira to fifty million naira) in this bond.

2. FGN Sukuk: This bond is a Sharia-compliant bond that is open to both Nigerian and non-Nigerian investors. It has a tenure of 7 years and an interest rate of 9.87% per annum. The investment window for this bond is now open and will close on Friday, November 10, 2023. You can invest a minimum of ₦100,000 (one hundred thousand naira) in this bond.

Reaping the Rewards of FGN Savings Bonds: November 2023 Offerings

In November 2023, the Debt Management Office (DMO) will offer two FGN Savings Bonds with a total of N150 billion. The bonds have tenors of 2 and 3 years and interest rates of 10.00% and 10.72% per annum, respectively. These bonds offer several benefits to investors, including:

Security and Stability: Backed by the full faith and credit of the Nigerian government, FGN Savings Bonds are considered to be among the safest investment instruments in the country.

Consistent Returns: FGN Savings Bonds offer fixed interest rates, providing investors with a predictable stream of income.

Capital Preservation: The primary objective of investing in FGN Savings Bonds is the preservation of capital, making them a suitable choice for risk-averse investors.

Diversification: FGN Savings Bonds can effectively diversify an investment portfolio, reducing overall portfolio risk.

Embarking on the Journey of Secure Investment with FGN Savings Bonds

Investing in FGN Savings Bonds presents a unique opportunity to secure your financial future while contributing to the development of Nigeria's economy. With their attractive interest rates, low minimum investment amount, and government backing, these bonds provide a compelling investment option for individuals and institutions alike. Take the first step towards a secure financial future by exploring the benefits of FGN Savings Bonds today.

Eligibility and Investment Process: Navigating the Investment Landscape

Investment in FGN bonds is open to both Nigerian and foreign investors, with eligibility criteria varying depending on the specific bond type. The investment process typically involves approaching a registered primary dealer or stockbroker, who will guide investors through the application and subscription process.

How to Purchase FGN Bonds

Investors can purchase the FGN bonds through any of the authorised dealers listed on the DMO website. The bonds are available in multiples of N1,000, subject to a minimum subscription of N5,000 and a maximum subscription of N50,000,000. Investors can also hold the bonds in their names or in the names of their children or grandchildren.

Conclusion: FGN Bonds: A Pillar of Stability and Growth

FGN bonds stand as a cornerstone of the Nigerian financial landscape, offering a secure and rewarding investment opportunity for individuals and institutions seeking stability and consistent returns. With their diverse array of bond types and attractive benefits, FGN bonds play a pivotal role in financing the nation's development while providing investors with valuable wealth creation.

I hope this is more comprehensive and informative. Please let me know if you have any other questions.

Recommended For You:

• Nigeria Food Inflation at 30.6%: Everything You Need to Know
• Shocking Truth: 133 Million Nigerians Are Poor Amid Government Claims

Risk Warning

In November 2023, the global bond market is expected to be influenced by factors such as central bank policies, economic indicators, and geopolitical events. It's important to keep in mind that bond investments carry risks, including interest rate risk, credit risk, and inflation risk. If you're considering investing in bonds, it's a good idea to consult with a financial advisor or a registered investment professional to determine the best course of action for your specific financial goals and risk tolerance. They can help you evaluate the current market conditions and identify potential investment opportunities that align with your needs.

FAQs

How do I buy FGN Bonds?

Primary Debt Market: The FGN Bonds Auctions Exercise is carried out by the DMO monthly. Primary Dealer Market Makers (PDMMs) empanelled by the DMO in 2006 are responsible for submitting bids for themselves and on behalf of their clients at the Auctions. 

Secondary Debt Market: Trading in FGN Bond is done daily in the Secondary debt market by licensed broker-dealers (banks and stockbrokers) on the floor of The Nigeria Securities Exchange (NSE) and on the FMDQ OTC Securities Exchange. The PDMMs are obligated to provide a two-way quote for FGN Bonds. This means that you can buy or sell your FGN Bonds whenever the need arises.

Who are Primary Dealer Market Makers (PDMMs)?

PDMMs are banks appointed by the DMO to act as authorized dealers in FGN bonds.

What are the functions of PDMMs?

The major functions of PDMMs are to: Take up, market and distribute the Primary Issues of FGN Bonds. Make markets in FGN Bonds on request, through the provision of continuous and effective two-way quotes to all PDMMs and non-PDMMs on demand and in all market conditions.

What is the Nominal Value of a Bond?

The nominal value of a bond is also known as the principal or the original or face value of a bond when it was first issued. It is the total amount upon which the issuer of the bond pays interest and is also the amount which must be repaid at the expiration of the tenor of the bond, that is, at the maturity date.

What is a Yield?

A bond yield is the amount of return an investor will realize on a bond or the current market interest rate for bonds. The yield of a bond is inversely related to its price, as the market price of a bond increases, the yield falls and vice versa.

What does Yield, Dirty and Clean Price mean?

Yield, the market price of a bond is the present value of all future interest and principal payments of the bond discounted at the bond’s yield or rate of return. The market price of a bond may include the accrued interest since the last coupon date. The price including accrued interest is known as the “dirty price”, while the price excluding accrued interest is the “clean price”.

What is a Coupon?

A coupon is the periodic interest (annual or semi-annual) which the issuer pays to the bond holders, which is generally fixed at issuance and expressed as a percentage of the bond’s face value. Hence, bonds are often called fixed income instruments.

What is the difference between a Bond and a Stock?

The main difference between stocks and bonds is that stocks represent an ownership interest in the issuing entity while bonds are a form of debt in which the issuer promises to pay the principal amount at a specific date. Another major difference is that stocks pay dividends to the owners only if the issuer declares profit. In the case of bonds, the issuer of a bond is obligated to repay the principal amount at the maturity date and also pay interest to the bold holders at a set interval (annual or semi-annual). If you buy a bond and hold it to maturity, you know exactly how much you are going to get back. That is why bonds are also known as ‘fixed-income’ securities. The buyer of stocks or shares in a company has purchased part of the equity and becomes part–owner. He is only entitled to dividends declared by the company when it makes a profit.

Why should I invest in an FGN bond?

Retirement Purposes. Starting or expanding a business. Settlement after apprenticeship. Pay children's school fees in future(e.g. for University education). Building a house or the development of a capital project. Future projects by town unions, associations, and student unions. To fund future social events such as weddings, and graduation ceremonies. Settlement of pension insurance obligation( for Corporate Fund Managers).

Are there Risks and Rewards in Investing in Bond?

Yes! Any time you lend money you run the risk that it will not be paid back – credit risk. Another source of risk for certain bonds (bond with call option) is that your money may be paid back before the maturity date, this is known as prepayment risk. When you buy a bond, the prospectus will indicate whether a bond is callable. The risk for a buy–and-hold bond to an investor is a rising inflation rate – inflation risk. A rise in inflation makes prices fall and yields or interest rates to rise. However, inflation risk, credit risk and prepayment risk are all considered into the pricing of bonds, the more the risk the higher the yield. Investors demand higher yields for longer maturities, since the longer you tie your money up in a bond the more you are at risk.

What are the benefits of FGN bonds to the Economy?

It fosters economic development by promoting the use of long-term funds for long-term investment in the economy. It serves as an efficient way of mobilizing domestic financial resources for productive investment in a non-inflationary manner. It provides an alternative source of funding to the Government, promotes self-reliance and reduce over-dependence on external finance. It helps investors to diversify their portfolios and enhances stable returns on their portfolios. It serves as an efficient and effective way of mobilizing funds for infrastructural development with the multiplier effect of promoting economic diversification. It helps to facilitate financial inclusion. It promotes fiscal discipline of the Government. It helps the government fund its budget deficits in a non-inflationary manner by reducing the resort to ways and means provided by the monetary authority to the Government. It provides a benchmark yield curve for pricing other debt securities/bonds. It provides the basic infrastructure for the development of the financial system and the overall economy. It strengthens the implementation of monetary policy by the Central Bank of Nigeria. It enhances transparency, discipline and stability in the public finance management of the country.

Who is a Government Stockbroker?

A Government stockbroker is a broker appointed by the Federal Government to provide liquidity for FGN Bonds on the floor of the NSE so that investors, especially retail investors, who wish to buy or sell FGN Bonds can do so.

What are the functions of a Government Stockbroker?

Act as an intermediary between the DMO, NSE, Stockbrokers and other market participants to ensure that all activities in FGN Bonds, and other FGN Securities that may be listed in the future, are effected smoothly. Provide prices for FGN Bonds on the floor of the Exchange so that investors, especially retail investors, who wish to buy or sell FGN Bonds can do so.

Who are the Regulators and Government Agencies in the FGN Bond Operations?

Debt Management Office (DMO Central Bank of Nigeria (CBN The Nigerian Stock Exchange (NSE Financial Market Dealers Quotation (FMDQ) OTC Plc Central Securities Clearing Systems Ltd Securities and Exchange Commission (SEC).

What is the Dematerialization of Bond Certificates?

It is a term which describes a shift from the issuance of physical certificates to the use of electronic entry to indicate the holding of individuals and enterprises in any bond issuance. It involves the use of a depository. Although DMO still issues physical certificates on request, the modern securities trading system de-emphasizes the use of physical certificates. Advancements in electronic communication and custodian services allow book-entry records and trade verification which has made trading more reliable and easier to manage than the use of physical certificates.

How can I be aware of the forthcoming Bond issues?

The best way to be aware of bond issues and other useful information is to subscribe to our blog at www.noblesolutions.info The DMO conduct Monthly Auction on behalf of the Federal Government of Nigeria and the notice is placed in National Dailies and the DMO Website, 7 days prior to the date.

What are the attractiveness/benefits of FGN Bonds to the investors?

It is a risk-free investment. The income earned (interest payments) is tax-exempt. It provides relatively high and stable returns when compared to the conventional bank deposit. The principal element, which is to be collected at maturity, can be used as collateral for securing credit facilities from financial institutions such as banks. Bondholders who want cash can trade the bonds on the floors of the NSE and FMDQ OTC Securities Exchange for immediate cash before maturity. It qualifies as liquid assets for banks in the estimation of their liquidity ratios by the CBN.