FG opens bids for $500m domestic bond at 9.75% interest rate

The Debt Management Office of the Federal Government has started accepting bids for its $500 million dollar-denominated domestic bond.

The bond, which opened for subscription on August 19, 2024, boasts a competitive interest rate of 9.75% per annum and a five-year tenure with semi-annual coupon payments.

To give investors a sufficient window to participate, the offer will be open till August 30 and the settlement date is September 6, 2024.

The minimum investment required is $10,000, and subsequent investments are in multiples of $1,000. Prospective investors are, however, barred from making investment payments through cash.

“Only electronic transfers into the appropriate accounts via the banking system may be used for payment. This transaction will not accept cash deposits unless they have been put into the domiciliary account for at least 30 days before the date of this offer,” according to the statement posted on Monday.

This bond is an aspect of the government’s broader strategy to attract investments from both domestic and diaspora investors. It offers a secure and attractive investment vehicle with the backing of the full faith and credit of the Federal Government of Nigeria.

Wale Edun, minister of finance, said a total of $1 billion of the bond will be issued in tranches and its proceeds will be channeled into critical sectors of the economy approved by the President.

Additionally, the bond’s coupon is benchmarked against comparable FGN Eurobond instruments, making it an attractive investment opportunity.

Analysts anticipate strong demand, given its competitive yield compared to returns on idle funds in domiciliary accounts. The bond’s listing on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange Limited will enhance its liquidity and accessibility, providing investors with a secure and attractive investment option.

The redemption of the bond will occur through a bullet repayment at the end of the five-year period, assuring investors of their full principal upon maturity.