National Wire About Nigerians, Nigerian Business and Other Stories
The Debt Management Office (DMO), has concluded plans to issue a new type of bond called the FGN Savings Bond (FGNSB).
This will be the Federal Government’s third debt instrument after the FGN Eurobond and FGN Treasury Bills.
Unlike the first two debt instruments, the FGNSB is targeted at retail investors and lower income earners to encourage savings and earn more income compared to their traditional savings accounts.
According to ARM Securities, the FGNSB is 100% safe as there is no default risk, it is backed up by the ‘full faith and credit’ of the Federal Government. Interest will be paid every quarter and the principal repaid at maturity.
The securities and financial advisory firm said amongst the benefits of the bond includes; It is 100% safe with guaranteed returns; Incomes earned from the; instrument are tax exempt; it provides steady income and a more competitive interest rate; the FGN Savings Bond Certificate can be used as collateral for loan; good for savings towards retirement, marriage, school fees, house projects and it enables individuals enjoy those benefits which accrue to high net-worth investors in the capital market.
Features for the bond showed that the FGN Savings Bond (FGNSB) will be issued on March 13, 2017 and interested parties (individuals and small savers) have five working days to buy the bond via their stockbrokers with allotment notification sent a week after.
Similarly, the minimum investment will be N5, 000 only (additional in multiples of N1, 000) and maximum N50 million.
“The tenor will be two – three years. Subsequent issuances will be monthly with quarterly payment of interest to investors. FGNSBs can be traded through stockbroking firms just like stocks and all requests are to be submitted through designated distribution agents and ARM Securities have been appointed as a key agent”, it added.
Commenting on the listing of FG’s Eurobond recently, the Director General, Debt Management Office (DMO), Dr Abraham Nwankwo said that “the listing of domestic Sovereign Eurobond reinforces FGN’s commitment to deepen and grow the
Nigerian capital market, noting that developing the domestic market can help bridge the infrastructure deficit constraining economic growth”.
He noted that the Eurobond which was over-subscribed by 780%, is part of FGN’s funding strategy for its 2016 capital expenditure and will be spent on key infrastructure projects, in line with its economic plan. “This huge oversubscription rate underscores a buoyant investor’s appetite for building exposure to Nigeria and demonstrates international confidence in the economy’s long term prospects”.
