An FGN Savings Bond is a fixed-income instrument targeted at retail investors and guarantees both interest payment and a bullet repayment of the principal on the maturity date. The bond is issued monthly to diversify funding sources for the government.
The debt agency, which is offering the debt instruments on behalf of the FGN, said the debt instruments comprising a two-year and three-year savings bonds will be offered at interest rates of 10.296 percent and 11.296 percent per annum respectively. The interest rates came lower compared with 11.244 percent and 12.244 percent per annum offered correspondingly on the same instruments in the preceding month.
The savings bonds will be issued at an auction which commenced on Monday, November 4 and expected to end on Friday, November 8, with a settlement date of November 13, 2019.
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As such, the two-year tenor would be due on November 13, 2021, while the three-year savings bond would mature on November 13, 2022. The DMO noted that interest payment on the instrument will be paid on a quarterly basis on February 13, May 13, August 13, and November 13.
The bonds are offered at N1,000 per unit subject to a minimum subscription of N5,000 and in multiples of N1,000 thereafter. But that’s limited to a maximum subscription of N50 million.
The DMO assured that the bonds are backed by the full faith and credit of the Federal Government of Nigeria and charged upon the general assets of the country, implying there is no risk of default.
But those would do not wish to hold on to the securities till the maturity date can trade their investment at the secondary market such as the Nigerian Stock Exchange and the FMDQ Securities Exchange.
According to DMO, the bond qualifies as securities in which trustees can invest under the trustee investment act; government securities within the meaning of Company Income Tax Act and Personal Income Tax Act for tax exemption for pension funds, amongst other investors; and as a liquid asset for liquidity ratio calculation for banks.
