The Nigerian Federal Government is planning to borrow N2.5 trillion from its second FGN bond auction of 2024, as revealed in a recent circular from the Debt Management Office (DMO).
Scheduled for February 19, 2024, with a settlement date of February 21, 2024, the auction marks a significant borrowing move for the government. In the previous month, the DMO offered four bonds worth N90 billion each, making the February auction the first time the government is borrowing over a trillion through a single bond.
The bond offerings include N1,250,000,000,000.00 for the FGN FEB 2031 (7-Yr NEW) and N1,250,000,000,000.00 for the FGN FEB 2034 (10-Yr NEW). These newly created bonds are offered at a unit price of N1,000, with a minimum subscription requirement of N50,001,000 and subsequent increments in multiples of N1,000. Interest payments on FGN bonds are made semi-annually.
FGN bonds meet the criteria outlined in the Trustee Investment Act, allowing trustees to invest in them. They also qualify as Government securities under the Company Income Tax Act (CITA) and Personal Income Tax Act (PITA), ensuring tax exemption for Pension Funds and other investors.
After being auctioned in the primary market to the primary dealer market makers, the bonds are listed on both the Nigerian Exchange Limited and FMDQ OTC Securities Exchange, the secondary markets.
In 2023, the Federal Government raised about N5.49 trillion through FGN bond auctions, which helped finance the 2023 budget deficit of N11.34 trillion. In January 2024, the government raised about N418.197 billion from four bonds auctioned. With the 2024 budget deficit projected at N9.18 trillion, the Federal Government appears committed to borrowing more from the domestic market.
Nairametrics