Domestic Bonds

Nigeria’s new FGN bond for January 2021 is oversubscribed by N139 billion

The Nigerian Federal Government Bond issue for January 2021, by the Debt Management Office (DMO), was oversubscribed by N139 billion to stand at N214.1 billion while that it was only looking to raise 75 billion naira for its 20-year bond issue.

This is contained in the result of the January 2022 FGN bond auction, released by the DMO on Wednesday.

The Debt Management Office issued two tranches of bonds in its first issue of the year, reopening its 10-year FGN 12.5 bond and issuing a new 20-year FGN 13% bond, which is expected to come in at due in 2042.

The breakdown of the report reveals that the first tranche was oversubscribed by 36.19 billion naira with subscriptions of 111.19 billion naira exceeding the amount offered by 75 billion naira, while the second tranche was oversubscribed by 139 billion naira. naira out of the offered amount of 75 billion naira.

Recall that Nairametrics last week published the DMO bond issuance schedule for the first quarter of 2022, which sets the first auction date for January 19, 2022, the others being February 16 and March 23, 2022 respectively.

According to the January auction performance report, winning bids for 12.50% FGN JAN 2026 and 13.00% FGN JAN 2042 were awarded at marginal rates of 11.50% 11.00% – 14.50 % 13.0000% and 13.00%, respectively.

However, the initial coupon rates of 12.5000% for the 12.5000% FGN JAN 2026 will be maintained, while the coupon rate for the 13.00% FGN JAN 2042 (new issue) is set at 13.00% .

What does that mean

The oversubscription of the FGN bond issue means that Nigerian investors are still investing their money in less risky instruments despite low returns as other investment channels have not been showing attractive returns lately. However, interest had improved from the single-digit interest rates recorded the previous year.

What you need to know about FGN bonds

  • FGN bonds are debt securities (liabilities) of the Federal Government of Nigeria (FGN) issued by the Debt Management Office (DMO) for and on behalf of the Federal Government. The FGN is obligated to pay the bondholder the agreed principal and interest as they fall due.
  • When you buy FGN bonds, you are lending to FGN for a fixed period. FGN bonds are considered the safest of all investments in the domestic debt market because they are backed by the “full faith and credit” of the federal government, and as such are classified as an instrument of risk-free debt.
  • According to the DMO, bonds have no risk of default, which means it is certain that your interest and principal will be paid when due. Interest earned on securities is tax exempt.