The Federal Government of Nigeria, through the Debt Management Office (DMO), has announced its intention to raise ₦450 billion via its January 2025 bond auction. This marks a significant increase from the ₦360 billion offered in January 2024 and the ₦120 billion from December 2024. The initiative is part of the government’s strategy to address fiscal deficits, meet financial obligations, and create investment opportunities for institutional and individual investors.
Scheduled for January 27, 2025, the bond auction features a mix of reopened and newly issued bonds aimed at attracting a wide range of investors. Settlement is set for January 29, ensuring successful bidders promptly receive ownership and begin earning interest.
Bond Offerings
The auction includes three categories of bonds:
1. Five-Year Bond: Originally issued in April 2029, this bond has a 19.30% coupon rate, targeting ₦100 billion.
2. Seven-Year Bond: First issued in February 2031, it carries an 18.50% coupon rate, with a target of ₦150 billion.
3. Newly Issued Ten-Year Bond: The FGN January 2035 bond, designed to raise ₦200 billion.
These bonds are part of the government’s domestic borrowing strategy for 2025, providing options for long-term, fixed-income investments.
Investment Features
• Subscription Details: Bonds are available in units of ₦1,000, with a minimum subscription of ₦50,001,000, and increments of ₦1,000.
• Interest Payments: Investors will receive semi-annual interest payments, ensuring consistent income.
• Maturity: Full redemption is guaranteed upon maturity, offering a lump-sum repayment.
• Tax Benefits: Exemptions under the Company Income Tax Act and Personal Income Tax Act make these bonds attractive to pension funds and approved investors.
Accessibility and Security
The bonds are listed on the Nigerian Exchange Limited and the FMDQ OTC Securities Exchange, making them easily tradable. Financial institutions can also use them to meet liquidity ratio requirements, as they are recognised as liquid assets.
Backed by the full faith and credit of the Federal Government, the bonds provide a secure, low-risk investment option. The government guarantee, charged upon Nigeria’s general assets, ensures reliable returns and stable income for investors.
Subscription Process
Investors can participate through authorised Primary Dealer Market Makers such as Access Bank, Zenith Bank, Stanbic IBTC Bank, and United Bank for Africa. These institutions will facilitate the subscription process.
Broader Borrowing Strategy
This bond issuance aligns with the Federal Government’s plan to leverage the domestic debt market to fund fiscal deficits and critical infrastructure projects amid global economic uncertainties. The government aims to raise up to ₦1.8 trillion during the first quarter of 2025, as outlined in the FGN Bond Issuance Calendar. Three auctions are scheduled for January, February, and March, combining reopened and new bonds to achieve this target.
The January auction sets the tone for a year of strategic borrowing, with the Federal Government aiming to balance fiscal needs and economic stability.
