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  • Investors take FGN $500m bond to oversubscription

    Investors take FGN $500m bond to oversubscription

    • Experts project 100 per cent intake •Final allotment to beneficiaries this week

    Nigeria’s first domestic foreign currency-denominated bond recorded significant oversubscription, underlining investors’ confidence in the country’s economic outlook.

    It was learnt at the weekend that the medium-term $500 million bond witnessed overwhelming subscriptions from local and foreign investors.

    It closed as a landmark transaction that ushered in a new window of foreign exchange (forex) to governments and companies.

    The Debt Management Office (DMO), which oversees the government’s debt issuances and management, is expected to make final allotment results this week.

    Sources with knowledge of the provisional allotments said the offer book was about $1 billion.

    A breakdown of the subscription pattern showed considerable appetite by individual retail investors and institutional domestic investors.

    There were also appreciable subscriptions by the diaspora community and foreign investors, although the stringent requirements within the week-long offer period appeared to have moderated subscriptions by retail diaspora investors.

    An investment banking source said subscriptions were more than $800 million while other sources said the success level of the bond was around $1 billion, 100 per cent above its initial offer size of $500 million.

    Sources said the DMO would take advantage of the overwhelming confidence by increasing the final issuance size, thus shortening the cycle of tranches in the bond’s total programme size of $1 billion. 

    The Series I $500 million Domestic FGN US Dollar Bond, a five-year bond, is the first tranche of the $2 billion bond registered by the Federal Government with the Securities and Exchange Commission (SEC).

    The bond’s structure allows the government to absorb oversubscriptions within the limit of the programme’s total size of $2 billion.

    Market sources said the success of the $500 million bond will open up a new window of capital raising for other tiers of government and companies, with the maiden sovereign bond serving as a benchmark for subsequent issuances.

    They pointed to the development of the corporate Eurobonds, Sukuk, non-interest issuance market and the green bond market, which followed the huge success of the Federal Government’s pioneering offers in those markets.     

    Sources said the significant oversubscription of the $500 million bond, with a five-year tenor and a coupon of 9.75 per cent per annum, showed that investors were confident Nigeria’s economic reforms would stay the curve.

    The Nation had reported in the wake of the opening of the application list two weeks ago that the maiden domestic dollar bond was heading for oversubscription given preliminary book building and general investor appetite.

    Experts were unanimous on the historic importance and benefits of the new bond issuance.

    Managing Director of Financial Derivatives Company (FDC), Mr. Bismarck Rewane, said at the weekend that the successful issuance of the bond will bring significant benefits to the naira.

    “The proceeds from the bond issuance, coupled with the CBN’s reintroduction of the Retail Dutch Auction System, which is expected to hold another auction in September, will stabilise the naira.

    “A sustained naira stability will ease price pressures, with inflation slowing throughout the remainder of 2024.

    “The slowdown in inflation will be supported by the harvest season, base effects, and an import duty waiver,” Rewane stated.

    Managing Director, Arthur Steven Asset Management, Mr. Olatunde Amolegbe, said Nigeria has a strange position of having a significant number of its citizens having huge deposits of dollars in domiciliary accounts earning nothing and not contributing significantly to economic activity.

    He said the bond provides a platform for those seemingly idle funds to be invested and get good returns while still enjoying the hedging advantage of holding a reserve currency.

    “This instrument also provides the Federal Government the much needed dollar liquidity for the forex market which hopefully will lead to the strengthening of the naira.

    “This could ultimately have a positive knock-on effect on inflation and consequently interest rates.

    “This is also a positive move for the capital markets as it increases product variety and liquidity within the market,” Amolegbe said.

    Managing Director, AIICO Capital, Dr Femi Ademola, said the domestic foreign currency-denominated bond is in fulfilment of the promise by the government to attract funding from Nigerians in the diaspora.

    According to him, the bond allows Nigerians to invest their foreign currency in dollars, thus removing the fear of a loss of value due to naira devaluation.

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    “The success of this issuance will be a confidence boost for the country and the current administration.

    “It would also allow the government to channel the remittances into more profitable ventures for investors.

    “In terms of impacting the financial market, the effect will be the same as the issuance of Eurobonds.

    “The instruments would be tradeable in the market thus deepening the market further,” Ademola said.

    Managing Director, HighCap Securities, Mr. David Adonri, explained that the domestic dollar bond will enable domiciliary account holders to earn good income on their generally non-interest yielding deposits in Nigerian banks.

    He said the bond will reduce capital flight since interest payments will be retained in the local economy.

    “Generally, it is an attractive investment outlet for domestic investors who have been yearning for investment in dollar-denominated assets locally. It will deepen the country’s capital market,” Adonri said.

    Besides the interest rate of 9.75 per cent per annum, the $500 million bond also qualifies for tax exemption for pension funds and other investors.

    It has also been granted liquid assets status by the Central Bank of Nigeria (CBN), implying that banks can use such investments in the calculation of their liquidity ratio (LR).

    Trustees and pension fund administrators can also invest in the bond. It is considered as risk-free with the sovereignty and credit of Nigeria as a guarantee.

    Also, the Federal Government had entered into an irrevocable commitment that it shall on no account convert or repay the principal amount and interests on the $500 million bond in naira.

    According to the Trust Deed for the $500 million bond, the Federal Government pledged an irrevocable commitment that it shall keep fidelity to the nature of the bond as a dollar-based issuance, with both the principal and the coupon to be paid in the currency of issuance.

    The Trust Deed is the binding and enforceable legal agreement between the Federal Government and subscribers to the $500 million bond.

    Preliminary book-building reports had indicated that there were strong possibilities of a substantial oversubscription, describing the bond as highly attractive.

    Market sources had said the pricing was in alignment with the current yield of Nigeria’s Eurobond of equivalent tenor.

    Nigeria’s Eurobond of between three and five years currently yield between 9.662 per cent and 10.03 per cent, thus the mid-point pricing of 9.75 per cent is considered attractive.

    The bond has the potential to attract a large number of foreign investors, according to most analysts.

    “For foreign investors, the price is attractive when compared to yield in the United States, Germany, Japan and the United Kingdom.

    “The risk premium for Nigeria’s sovereign risk is adequate,” a senior investment banker had said.

    Sources had said there was notable enthusiasm for the first sovereign dollar-denominated domestic bond, with interests cutting across domestic institutional and individual investors, portfolio funds and the Diaspora community.

    “I think it’s possible if you look at the universe of potential investors that will be eligible to participate. There is a report that says the dollars held in domiciliary accounts in Nigerian banks are in excess of $20 billion. This represents potential investors.

    “There are also lot of very active foreign-currency-denominated mutual funds that are also potential investors.

    “There are also Nigerians in the diaspora who are currently earning less than nothing on their investments that will find investing in this dollar bond quite attractive in terms of returns.

    “The foreign portfolio investors are also not precluded from investing, and this should also boost patronage.

    “So, the chance of an oversubscription is possible,” said a senior investment banker with a speciality in debt issuances.

    Another source said the emerging macroeconomic outlook is encouraging to investors, who may seek the opportunity of the dollar issuance to lock in value.

    The government had ring-fenced the bond against money laundering and illicit flows by stipulating stringent subscription rules.

    Under the guidelines, all corporate or institutional investors are required to provide information on country where the entity is incorporated as well as residency classification, while such corporate application must bear the corporate body’s seal and be signed in accordance with the company’s signature mandate by duly authorised officials.

    Pension or provident funds are required to ensure that applications are in line with the guidelines of the National Pension Commission (Pencom) on custody of pension assets.

    Individual applicants are required to provide evidence of full payment for the amount applied, full name, Biometric Verification Number (BVN) number, residency classification and regular signature.

    Application from a group of individuals should be made in the names of those individuals with no mention of the name of the group.

    An application by an illiterate person should bear his or her right thumbprint on the subscription form and be witnessed by an official of the issuing house at which the application is lodged, who must first have explained the meaning and effect of the application to the illiterate person in his or her own language. The witness should indicate his or her name and signature also on the form.

    Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, while unveiling the $500 million bond in Lagos, said it was a bold step towards economic transformation as it would further attract both local and international investors.

    He explained that the bond issuance would further expand the Nigerian financial system while providing the country the opportunity to tap the huge resources of its Diaspora community.

    According to him, with the bond issuance, Nigeria will be able to access foreign currency held by Nigerians abroad, as well as other international investors who believe in the macroeconomic reform initiatives spearheaded by the Tinubu Administration.

  • FGN savings bonds subscription opens

    FGN savings bonds subscription opens

    The Debt Management Office (DMO) has announced an offering for a two-year and three-year Federal Government of Nigeria (FGN) savings bonds.

    In a statement on Monday, DMO said the offers, which opened on November 6, 2023, will close by November 10, 2023, at N1000 per unit.

    The agency said the first offer is a two-year FGN savings bond due on November 15, 2025, at an interest rate of 12.464 percent per annum.

    The second issuance, DMO said, is a three-year savings bond maturing on November 15, 2026, at 13.464 percent per annum interest rate.

    The organisation also said coupon payment dates are November 15, 2023, February 15, May 15, August 15 and November 15 2024, respectively.

     “They are offered at N1,000 per unit subject to a maximum subscription of N5,000 and in multiples of N1,000 thereafter, subject to a maximum subscription of N50 million,” DMO said.

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    “Interest is payable quarterly and the bullet repayment (principal amount) is done on maturity.”

    The debt office said the latest offers have a settlement date of November 15, 2023.

    DMO said that FGN savings bonds were backed by the full faith and credit of the FGN and charged upon the general assets of the country.

    The debt office said: “They qualify as securities in which trustees can invest under the trustee investment act.”

        “They qualify as government securities within the meaning of the company income tax act (CITA) and personal income tax act (PITA) for tax exemption, pension funds, amongst other investors.”

        The agency further said the savings bonds are also listed on the Nigerian Exchange Limited (NGX) and qualify as liquid assets for liquidity ratio calculation for banks.

  • Debut 30 year FGN Bond oversubscribed

    Nigeria’s first 30 year FGN Bond has been oversubscribed.

    A statement issued by the Debt Management Office (DMO) on Wednesday night said “investors keenly contested for the N20 billion 30-year FGN Bond offered by the Debt Management Office (DMO) at the April 2019 FGN Bond Auction.”

    According to the DMO, “a total subscription of N80.41 billion was received from investors for the N20 billion offered by the DMO for the 30-year Bond, representing a 400% subscription rate.”

    The bulk of the subscriptions the DMO said “came from asset managers and insurance companies who have been looking for long-term, good quality assets to buy in order to match their liabilities.”

    With the success of the 30-year Bond offering, the DMO said it “has reinforced its pioneering role in the Domestic Capital Market by introducing another longer-dated instrument which for the Government, represents appropriate funding for infrastructure and an effective tool for spreading out its liabilities, while for the private sector, it provides an avenue for other issuers, such as corporates, to access longer-term funding for their projects.”

    The DMO offered a total of N100 billion in tenors of 5, 10 and 30 years at the Auction and received total subscriptions of N149.30 billion, representing a total subscription level of about 150%.

    The DMO allotted a total of N97.40 billion to successful bidders at 14.50% for the 5-year, 14.55% for the 10-year and 14.80% for the 30-year FGN Bond.

  • March 2019 FGN bond auction oversubscribed

     The FGN Bond Auction for March 2019 conducted by the Debt Management Office (DMO) on Wednesday, March 27, 2019, at which N100 billion Bonds were offered, was oversubscribed just as in the Auctions for January and February 2019.

    A statement from the DMO said it “offered three instruments at the Auction for 3, 7 and 10-year tenors and subscriptions for the three instruments was in excess of N148 billion for competitive bids.”

    The statement added: “Non-competitive bids valued at N92.6 billion were also received, taking the total subscriptions across the 3 tenors to over N240.6 billion.

    Read also: Investors bid N234bn for N150bn bonds offer — DMO

    “The trend of investors’ preference for the longer tenured instrument continued with the 10-year bond significantly oversubscribed with a bid-to-cover ratio above 5” the DMO said.

    Allotments were made to successful bidders at the rates of 13.5% for the 5-year, 13.5% for the 7-year and 13.5% for the 10-year bonds, which are considerably lower than the allotment rates for the February 2019 Auction.

    “The total amount allotted to both competitive and non-competitive bids for the three instruments was N121.95 billion,” the statement said.

  • FGN April bonds oversubscribed by 292%

    The Federal Government of Nigeria (FGN) April 2018 Bond issued to raise funds to implement the 2018 budget was oversubscribed.

    A statement from the Debt Management Office (DMO) said the bond was oversubscribed by 292 per cent.

    “Three bonds (5, 7 and 10 years) were offered for a total amount of N90.00 billion. Total subscription was N262.48 billion, a subscription rate of 292 per cent. Each of the bonds was oversubscribed, with demand for the 10-year bond particularly strong at a rate of 534 per cent,” the statement read.

    The DMO said it conducted the fourth in the series of FGN Bond Auctions for 2018 on April 25, to raise funds for the implementation of the 2018 Budget. “A total of N90.00 billion was allotted at 12.75 per cent for the five-year bond, 12.85 per cent for the 7-year bond and 12.89 per cent for the 10-year bond,” DMO said, adding that “interest rates at the auction continued to trend downwards, as was the case at the March 2018 auction, and the rates for all the bonds offered at the April Auction were below 13 per cent.”

    The drop in rates “is consistent with the DMO’s expectations, based on its redemption of Nigerian Treasury Bills, which started in December 2017.”

    The funds injected into the market through the redemptions, and the lower interest rates, are supposed to make credit available to private sector borrowers at lower rates.

     

    This should enable them to lower their cost of operations and be more competitive in pricing.

  • FGN Savings Bond targeted at poor, says DMO D-G

    The Director General of Debt Management Office (DMO), Abraham Nwankwo has stated the new Federal Government of Nigeria Savings Bond (FGNSB) was designed to give them a stake in government.

    He was addressing leaders of market unions and leaders of middle income earner organisations in an advocacy/sensitisation workshop on the FGN Savings Bond in Onitsha.

    He said over the years, government has issued bond, but it remained elitist bonds, which were sold as wholesale bond to privileged individuals, corporate companies and organisation.

    “All these super rich individuals bought it as wholesale bond, but the difference we have in the FGNSB is that we are making these bond available to the ordinary Nigerians. There are a lot to benefits I  investing in the FGNSB. First is that it is an opportunity for the common man to have a stake in the country. You can boost of having borrowed to the federal government,” he said.

    “Again, your investment has interest accruing to you, straight into your bank account, and your interest is tax free. There are many benefits. By Monday next week, the savings bond will open, and it will remain open for five days. We will also disclose the interest rate, and everyone is at liberty to buy. You can invest from as little as N5,000 to as high as N50 million,” Nwankwo said.

    The workshop featured teachings on the workings of bond, and how to purchase them. DMO’s Director of portfolio management, Oladele Afolabi took participants through a lecture on the bonds, while reeling out the list of accredited stockbrokers.

    Chairman of Niger Bridgehead market, Emmanuel Anagu who spoke on behalf of other market leaders, at the event stated that he is truly convinced that the DMO meant well for the poor by taking the workshop to traders in Onitsha.

    “Before now, we hear of sales of federal government bond, but it is usually for the very rich, but today the federal government has brought it down to us, but what we ask is that we must make this workshop a regular one to drum it into the mi D’s of our people.” The DG also reiterated the importance of the purchase of the savings bond, saying that it could serve as a means of saying for the future.

  • Commonwealth Games: Federal government promises to equip athletes

     
    President Muhammadu Buhari has promised to support the 2018 Commonwealth Games bound athletes with adequate resources for training and participation in Gold Coast, Australia.
    The President made the remark at the National Stadium Surulere Lagos where he received the Queen’s Baton Relay team.
    Speaking on the occasion, President Buhari who was represented by the Minister of Youth and Sports Barrister Solomon Dalung expressed gratitude that such event has provided a unique opportunity for Nigeria to share in the excitement of the Commonwealth

    Games.
    The President added that Nigeria will be represented by a compact team which will be adequately prepared to do better than its previous outings.
    “Our plan is to send a compact team of Athletes to the 2018 Games with the hope of surpassing our outing at the previous Games in terms of medals. Government will not renege

    in its role of ensuring that the athletes are equipped with adequate resources for training and participation in the competition. I, therefore, urge our sportsmen and women, coaches and other officials to intensify preparations for the Games so as to guarantee victory at the competition “.
    Earlier, the leader of the Queen’s Baton Relay team Sam Gideon thanked the Federal Government and the good people of Nigeria for their warm hospitality and urged the federal government to do all it can to prepare the athletes ahead of the games.
    The count down to 100 days to the commencement of the Commonwealth Games begins today

  • BPE tasks FGN, EPDC on power supply

    BPE tasks FGN, EPDC on power supply

    The Bureau for Public Enterprise (BPE) has tasked the federal government and Electricity Power Distribution Companies to adhere strictly to the terms of agreement on privatisation in the interest of Nigerians.

    The bureau said both parties must strive to meet up its obligations as stipulated in the sales agreement during the privatisation of the power sector to enable citizens enjoy steady power supply.

    Deputy Director, Electric Power Department of the Bureau, Amaechi Aloke, stated this in Jos, the Plateau State capital, during a surveillance visit to the Jos Electricity Distribution Company (JED)

    Aloke said: “The surveillance visit was part of the monitoring of activities of the company and to ensure compliance with sales agreement. The exercise was the first major comprehensive monitoring we are undertaking apart from the initial surveillance done after the first six months of the transaction.

    “Our duty is to enforce and make sure that both parties fulfill their obligations. The agreement says that if they do not fulfill their obligations, we can take back the company.  On the other part, if the government refuses to do what is expected from them and frustrate them out of the business, they can return the company back to government and will get their money back and get 100 percent return as penalty.

    “But beyond that, we are more interested in making sure the electricity consumers are not disappointed in the transaction, the consumer deserves improved power supply and nothing else.

    “Both parties have motivations to make the transactions succeed.  Financial institutions are willing to support the business; all they need is the signal that the industry is viable, and money invested in it will be recovered.

    “The new owners have made specific commitment known as performance agreement. The agreement specified what they should do within the period of five years broken down into annual target for them to meet and include metering program and building platform.”

  • Photos: FGN delegation condoles with Borno government

    Photos: FGN delegation condoles with Borno government

    L-R; Leader of Federal Government Delegation and National Security Adviser to the President Major General Babagana Monguno condole the Bornu State Governor Alhaji Kashim Shettima and the El-Kanemi Shehu of Bornu, Alhaji Abubakar Ibn Umar Garbai over the death of the State’s Deputy Governor later Alhaji Zannah Umar Mustapha at the weekend Maiduguri Bornu State.
    L-R; Leader of Federal Government Delegation and National Security Adviser to the President Major General Babagana Monguno condole the Bornu State Governor Alhaji Kashim Shettima and the El-Kanemi Shehu of Bornu, Alhaji Abubakar Ibn Umar Garbai over the death of the State’s Deputy Governor later Alhaji Zannah Umar Mustapha at the weekend in Maiduguri Bornu State.

    Bornu State Governor Alhaji Kashim Shettima welcomes Senior Special Assistant to the President on Media and Publicity, Mallam Garba Shehu, Senior Special Assistant to the President on Household and Social Events., Mr Sarki Abba, Permanent Secretary General Service Office, Office of the SGF, Alhaji Mohammed Bukar and National Security Adviser to the President Major General Babagana Monguno. With them is Alhaji Kyari Monguno left when federal Government delegation visit to Bornu on the death of the State’s Deputy Governor, later Alhaji Zannah Umar Mustapha at the weekend Maiduguri Bornu State
    Bornu State Governor Alhaji Kashim Shettima welcomes Senior Special Assistant to the President on Media and Publicity, Mallam Garba Shehu, Senior Special Assistant to the President on Household and Social Events., Mr Sarki Abba, Permanent Secretary General Service Office, Office of the SGF, Alhaji Mohammed Bukar and National Security Adviser to the President Major General Babagana Monguno. With them is Alhaji Kyari Monguno left when federal Government delegation visit to Bornu on the death of the State’s Deputy Governor, later Alhaji Zannah Umar Mustapha at the weekend Maiduguri Bornu State

    The El-Kanemi Shehu of Bornu, Alhaji Abubakar Ibn Umar Garbai receives the Federal Government Delegation led by the National Security Adviser to the President Major General Babagana Monguno, Permanent Secretary General Service Office, Office of the SGF, Alhaji Mohammed Bukar, Senior Special Assistant to the President on Household and Social Events., Mr Sarki Abba and Senior Special Assistant to the President on Media and Publicity, Mallam Garba Shehu. With them is Kyari Monguno left during a condolence visit on the death of the State’s Deputy Governor, later Alhaji Zannah Umar Mustapha at the weekend Maiduguri Bornu State
    The El-Kanemi Shehu of Bornu, Alhaji Abubakar Ibn Umar Garbai receives the Federal Government Delegation led by the National Security Adviser to the President Major General Babagana Monguno, Permanent Secretary General Service Office, Office of the SGF, Alhaji Mohammed Bukar, Senior Special Assistant to the President on Household and Social Events., Mr Sarki Abba and Senior Special Assistant to the President on Media and Publicity, Mallam Garba Shehu. With them is Kyari Monguno left during a condolence visit on the death of the State’s Deputy Governor, later Alhaji Zannah Umar Mustapha at the weekend in Maiduguri, Bornu State

    Leader of Federal Government delegation and National Security Adviser to the President, Major General Babagana Monguno with the Bornu State Governor Alhaji Kashim Shettima during a condolence visit on the death of the State’s Deputy Governor later Alhaji Zannah Umar Mustapha at the weekend Maiduguri Bornu State
    Leader of Federal Government delegation and National Security Adviser to the President, Major General Babagana Monguno with the Bornu State Governor Alhaji Kashim Shettima during a condolence visit on the death of the State’s Deputy Governor later Alhaji Zannah Umar Mustapha at the weekend Maiduguri Bornu State

  • N7.5b SDF: FGN bonds cushion banks’ revenue drop

    Deposit Money Banks (DMBs) are becoming buyers of Federal Government of Nigeria (FGN) bonds, particularly at the shorter end, as they sought to replace the diminished revenue stream from the Standing Deposit Facility (SDF).

    The total bid in October fell to N116 billion, its lowest level for more than one year, but attributed to a delay in the monthly distribution by the Federation Accounts Allocation Committee (FAAC). This time, however, we expect a rebound following last Thursday’s Central Bank of Nigeria’s (CBN’s) circular.

    The circular stipulates that banks and discount houses only earn the 10 per cent interest rate under the CBN’s SDF on placements of up to N7.5 billion.

    “Already, today’s monthly auction of FGN bonds by the Debt Management Office, looks to raise N65 billion, and offers the same issues as the four previous months: 13.05 per cent August 16, 14.20 per cent March 2024 and 12.15 per cent July 2034,” the FBN Research said in an emailed report.

    The CBN pegged the SDF for banks at N7.5 billion, remunerated at 10 per cent per annum.

    Standing facilities are aimed at providing and absorbing overnight liquidity, signal the general stance of monetary policy and bound overnight market interest rates.

    CBN Director, Financial Markets Department, E.U. Ukeje, said the apex bank observed that banks and discount houses have preference for keeping their idle balances in the CBN as SDF, thereby constraining the process of financial intermediation.

    He said the guidelines for the operations of the SDF were reviewed to encourage banks to increase lending to the productive sector of the economy.

    The review, he said, entails that the remunerable daily placements by banks and discount houses at the SDF, shall not exceed N7.5 billion. This shall be remunerated at the SDF rate of 10 per cent per annum.

    Ukeje said any deposit by a bank or discount house in excess of N7.5 billion, shall not be remunerated, pointing out that “these provisions are without prejudice to the subsisting Monetary Policy Rate (MPR) corridor.”

    For the avoidance of doubt, he stresed, “the SDF remains operative as a monetary policy tool, but patronage of the facility shall be subjected to the above modifications,” he said.

    The MPR corridor remains at plus or minus 200 basis points round MPR. Continuing, he said: “The SDF shall attract an interest rate of MPR minus 200 basis points, 10 per cent per annum up to the limit of N7.5 billion, while any deposit over and above the maximum will attract zero interest rate”.