By Dipo Olowookere
On Wednesday, October 25, 2017, the Federal Government of Nigeria (FGN), through the Debt Management Office (DMO), will conduct a bond auction exercise at the domestic market.
The debt office would be hoping to raise between N90 billion and N110 billion from the bond exercise.
According to the calendar released by the DMO recently for its bond sale for the fourth quarter of this year, there would be two instruments on offer, all re-openings, the FGN JUL-2021 (5-year Re-Opening) and the FGN MAR-2027 (10-year Re-Opening).
The DMO said it would auction the N45-N55 billion FGN JUL 2021 bond at 14.50 percent, while the N45-N55 billion FGN MAR 2027 notes would be offered at 16.2884 percent.
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 has an obligation to pay the bondholder the principal and agreed interest as and when due.
When FGN Bonds are bought by investors, they are lending to the FGN for a specified period of time.
The FGN Bonds are considered as the safest of all investments in domestic debt market because it is backed by the ‘full faith and credit’ of the Federal Government, and as such it is classified as a risk free debt instrument.
They have no default risk, meaning that it is absolutely certain interest and principal would be paid as and when due. The interest income earned from the securities is tax exempt.
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