By Milcah Tanimu

The Federal Government of Nigeria is gearing up to borrow N450 billion from its third FGN bond auction of 2024, as outlined in the latest circular from the Debt Management Office (DMO). This borrowing target marks a significant decrease of 82% compared to the N2.5 trillion target set for the same bond auction in the previous month.

Scheduled for March 18, 2024, with a settlement date of March 20, 2024, the auction will offer three different bonds: a new 3-year bond maturing in March 2027, along with re-openings of the 18.50% FGN February 2031 and the 19.00% FGN February 2034 bonds. Each bond will be allocated N150 billion, summing up to the government’s N450 billion borrowing objective for the month.

Investors participating in the auction will purchase these bonds at prices corresponding to the yield-to-maturity bid that clears the auction volume and any accrued interest. These bonds play a crucial role in the government’s debt management strategy, offering investors a relatively secure investment option while aiding in managing the country’s debt profile and facilitating efficient fund management.

The subscription details specify that units of sale will be priced at N1,000 per unit, with a minimum subscription of N50,001,000 and subsequent subscriptions in multiples of N1,000. Interest on these bonds will be paid semi-annually until maturity, with a bullet repayment scheduled thereafter.

FGN bonds are backed by the full faith and credit of the Federal Government of Nigeria, providing investors with a secure investment avenue. They are secured against the general assets of Nigeria and are listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange. Additionally, these bonds qualify as eligible securities for trustees under the Trustee Investment Act and are recognized as government securities within the meaning of the Company Income Tax Act (CITA) and Personal Income Tax Act (PITA), as well as liquid assets for banks’ liquidity ratio calculation.

In 2023, the Federal Government raised approximately N5.49 trillion through FGN bond auctions to finance the budget deficit. This trend continued into 2024, with the government raising N418.197 billion in January and N1.49 trillion in February through bond auctions. With the budget deficit for 2024 set at N9.18 trillion, the government is poised to increase borrowing from the domestic market to meet its financial obligations.