The Federal Government seeks to borrow N2.5 trillion from its second FGN bond auction of 2024, according to the latest circular from the Debt Management Office (DMO).
According to the circular seen by Nairametrics, the auction is set for February 19, 2024, with the settlement date being February 21, 2024.
In the previous month, the DMO offered four bonds worth N90 billion each. The February auction appears to the first time the Federal Government is borrowing over a trillion through a single bond.
Details of the February Bond offer
The bond offerings are:
N1,250,000,000,000.00 – FGN FEB 2031 (7-Yr NEW)
N1,250,000,000,000.00 – FGN FEB 2034 (10-Yr NEW)
While the first is expected to mature in seven years, the second will mature in 10 years. They are both newly created bonds, and 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 (twice a year).
About FGN Bonds
The FGN bonds meet the criteria outlined in the Trustee Investment Act, allowing trustees to invest in them. Additionally, they qualify as Government securities under the Company Income Tax Act (CITA) and Personal Income Tax Act (PITA), ensuring they are tax-exempt for Pension Funds and other investors.
After the bonds are auctioned in the primary market to the primary dealer market makers, the bonds are then listed on both the Nigerian Exchange Limited and FMDQ OTC Securities Exchange, which are the secondary markets.
What you should know
In 2023, the Federal Government raised about N5.49 trillion through FGN bond auctions which were used to finance the 2023 budget deficit of N11.34 trillion.
In January, the Federal Government raised about N418.197 billion from the four bonds that were auctioned.
With the budget deficit in the 2024 budget put at N9.18 trillion, the Federal Government seems committed to borrowing more from the domestic market.
