FG opens for subscription $500m-denominated bond at 9.8%

The Federal Government has opened offers for its dollar-denominated domestic bond of $500m at an interest rate of 9.75 per cent per annum for a tenor of five years, set to mature in 2029.

The government also barred prospective investors from making investment payments through cash.

The Debt Management Office (DMO) in a statement posted on its website, said: “Payment shall only be made through the banking system and electronic transfers into the designated accounts.

“No cash deposits will be accepted under this transaction, except where such cash deposits have been made into the domiciliary account for not less than 30 days before the date of this offer.”

The dollar bond is the first of its kind in the country, with the bond offering bullet repayment at maturity in US dollars and full repayment of the principal amount at the end of the five-year term.

The statement indicated that Nigerian residents, Nigerian individuals with savings abroad, Nigerians in the Diaspora, and Qualified Institutional Investors were listed as eligible investors.

The offer has an opening date of August 19, a closing date of August 30, and a settlement date of September 6, 2024, giving investors a sufficient window to participate in this offering.

The bond is structured as a five-year investment, with coupon payments made semi-annually.

Investors can purchase units at a minimum of $1,000 each, with an initial minimum subscription set at $10,000 (10 units). Subsequent investments can be made in multiples of $1,000.

The redemption of the bond will occur through a bullet repayment at the end of the five-year term, ensuring that investors receive their principal in full upon maturity.

The bond qualifies as a security under several legal frameworks, including the Trustee Investment Act and the Pension Reform Act, allowing trustees and Pension Fund Administrators to invest in it.

Additionally, it qualifies as a government security under the Company Income Tax Act and the Personal Income Tax Act, offering tax exemption benefits for pension funds.

The bond will be listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange Limited, enhancing its liquidity and accessibility for investors.

United Capital Plc is the lead issuing house and coordinator, with Meristem Capital Limited, Stanbic IBTC Capital Limited, and Vetiva Advisory Services Limited also serving as issuing houses.

The bond is further supported by a network of primary dealer market makers and receiving banks, including Access Bank Plc, Citibank Nigeria Ltd., and Guaranty Trust Bank Ltd., among others.