The Federal Government is hoping to raise about N120 billion as it auctions two savings bonds today.

The amount expected is a significant drop of 33.3 per cent, compared to the N180 billion raised in October, signalling a slowing down in bond offerings by the Federal Government.

FGN Bonds have remained the dominant debt instrument in the federal government’s domestic debt stock, accounting for N52.315 trillion or 78.13 per cent of the total domestic debt as of June 2024.

Experts had warned that aggressive domestic debt financing could crowd out private investment by tapping into domestic private savings that would otherwise be available to the private sector for investment.

They also argued that servicing domestic debt can consume a large portion of government revenues, especially when domestic interest rates are higher than foreign rates.

The November bond auction comprises two re-openings of existing bonds – the 19.3 per cent FGN APR 2029 (five-year re-opening) and the 18.5 per cent FGN FEB 2031 (seven-year re-opening), with each valued at N60 billion.

Both offerings are expected to attract significant interest from investors due to their attractive coupon rates, reflecting the current yield environment.
The settlement date is set for November 20, 2024. Units are offered at N1,000 per unit, subject to a minimum subscription of N50,001,000, in multiples of N1,000.

According to the Debt Management Office (DMO), the bonds qualify as securities in which trustees can invest under the Trustee Investment Act. They also enjoy tax exemptions under the Company Income Tax Act (CITA) and the Personal Income Tax Act (PITA), making them attractive for pension funds and institutional investors.