DMO to auction N150bn FGN bonds for subscription

The Debt Management Office (DMO), on behalf of the Federal Government, has offered for subscription N150 billion worth of Federal Government of Nigeria (FGN) bonds by auction.

This is according to a disclosure published on the website of the agency. The bonds were listed in three tranches, each with N50 billion.

N50 billion – 12.50 per cent FGN Jan 2026 (10-yr re-opening); N50 billion – 16.2499 per cent FGN Apr 2037 (20-yr re-opening); N50 billion – 12.98 per cent FGN Mar 2050 (30-yr re-opening)

According to the DMO, auction date is October 20, 2021 while settlement date is October 22, 2021.

For re-openings of previously issued bonds, (where the coupon is already set), the agency noted that 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.

It qualifies as securities in which trustees can invest under the Trustee Investment Act

It also qualifies as government securities within the meaning of Company Income Tax Act (“CITA”) and Personal Income Tax Act (“PITA”) for Tax Exemption for Pension Funds amongst other investors

It should be noted that all FGN bonds qualify as liquid assets for liquidity ratio calculation for 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

The DMO had issued a similar bond worth N150 billion for subscription by auction in April 2021. The bonds were also issued in three tranches with 16.2884 per cent, 12.5 per cent, and 9.8 per cent for the 10-year reopening bond, 15-year, and 25-year reopening bond, respectively.

“In the new week, we expect activity in the money market to be relatively calm as the market expects just N85 billion worth of OMO matures. “Meanwhile, we feel that the N150 billion worth of bond sales by Debt Management Office (DMO) should further provide clarity to the direction of yields”, dealers from Afrinvest (West) Africa Limited said in their market report for the week.

A bond could be thought of as an I.O.U. between the lender and the borrower that includes the details of the loan and its payments.

A bond has an end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments that will be made by the borrower.