The Federal Government of Nigeria has unveiled a new financial instrument aimed at boosting dollar liquidity in the country.
The Debt Management Office (DMO) announced on Monday the offering of a $500 million dollar-denominated bond for subscription to both domestic and international investors.
The Explainer learned that this five-year domestic Federal Government of Nigeria (FGN) dollar bond, set to mature in 2029, carries an attractive interest rate of 9.75 percent per annum.
The bond issuance opens on August 18 and closes on August 30, with settlement scheduled for September 6.
According to the DMO statement, the bond is offered at $1,000 per unit, with a minimum subscription of $10,000 (10 units) and subsequent multiples of $1,000. The coupon payments will be made semi-annually, while the principal sum will be repaid at maturity.
The government has outlined a diverse group of eligible investors for this bond, including Nigerian residents, Nigerians with savings abroad, members of the Nigerian diaspora, and qualified institutional investors.
Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, emphasized the nature of this initiative, stating, “Dollar funding is critical for the exchange rate to stabilize.”
The DMO has put in place strict payment protocols to ensure transparency and security.
“Payment shall only be made through the banking system and electronic transfers into the designated accounts. No cash deposits will be accepted under this transition, except where such cash deposits have been made into the domiciliary accounts for not less than 30 days prior to the date of offer,” the DMO clarified.
To boost investor confidence, the dollar-denominated FGN bond comes with several attractive features. It is backed by the full faith and credit of the Federal Government of Nigeria and has been granted liquid asset status by the Central Bank of Nigeria (CBN).
Furthermore, it qualifies as a security in which trustees can invest under the Trustee Investment Act and in which Pension Fund Administrators can invest under the Pension Act.
The bond also offers tax benefits, qualifying as government securities within the meaning of the Company Income Tax Act and Personal Income Tax Act. This status provides tax exemption for pension funds and other eligible investors.
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To enhance its tradability and liquidity, the dollar-denominated FGN bond will be listed on both the Nigerian Exchange Limited and FMDQ OTC Securities Exchange Limited.
This bond issuance is part of a broader strategy announced by the federal government last Thursday to issue a $500 million local bond to improve dollar liquidity.
