The Federal Government is targeting to raise N2.5 trillion from its second FGN bond auction of 2024 as part of its efforts to raise more funds through debt instruments in order to bridge the about N9.18 trillion deficit in the approved 2024 budget.
According to the latest circular from the Debt Management Office (DMO) on the auction timeline, the auction is set for February 19, 2024, with the settlement date being February 21, 2024.
An analysis of the bond offer showed that N1,250,000,000,000.00 would be offered for the FGN FEB 2031 while N1,250,000,000,000.00 is to be offered for the FGN FEB 2034, implying that while the first is expected to mature in seven years, the second will mature in 10 years.
The DMO stated that they were both newly created bonds, and were 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).
It would be recalled that in January this year, the DMO offered four bonds worth N90 billion each, raising about N418.197 billion in total but the February 2024 auction appeared to be the first time the Federal Government is borrowing over a trillion through a single bond.
According to the DMO, the FGN bonds have fulfilled all the criteria outlined in the Trustee Investment Act, allowing trustees to invest in them and they qualified 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.
In practice, after the FG 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.
Available data on the Federal Government’s borrowing through bonds auctions in 2023 showed that it raised about N5.49 trillion which were used to finance the 2023 budget deficit of N11.34 trillion.
