DMO Opens N1 Trillion FGN Bond Offer for Long-Term Investors

Debt Management Office (DMO), on behalf of the Federal Government, has opened a N1 trillion offer of two Federal Government of Nigeria (FGN) bonds, giving investors access to long-dated sovereign debt amid changing conditions in the domestic fixed-income market.

The offer comprises a new 10-year FGN bond due September 2036, valued at N400 billion, and a N600 billion reopening of the 2038 FGN bond, with a coupon of 15.45 percent per annum. According to the DMO, the offer opened on Monday, while settlement is scheduled for September 16. The bonds are offered at N1,000 per unit, with a minimum subscription of N50 million and multiples of N1,000 thereafter.

For the reopened 2038 bond, successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the auction volume, plus accrued interest. The DMO said interest on the bonds would be paid semi-annually, while principal would be repaid in a lump sum at maturity. For investors, the 15.45 percent coupon on the 2038 bond provides a reference point for assessing returns, although the actual yield available to successful bidders will depend on the auction-clearing price. Investors therefore face a trade-off between locking funds into long-term sovereign debt and the possibility of higher or lower yields as market conditions change.

The size of the offer also gives the auction significance for the domestic bond market, with N1 trillion of securities being made available across the two maturities. The DMO said the bonds are backed by the full faith and credit of the Federal Government and are listed on the Nigerian Exchange Limited and FMDQ OTC Securities Exchange.

The securities also qualify as liquid assets for banks’ liquidity-ratio calculations and are eligible investments for trustees under the Trustee Investment Act. The auction comes as investors continue to assess returns across Nigeria’s fixed-income market, with longer-dated government securities offering the prospect of locking in yields while exposing investors to interest-rate and market-price movements before maturity.

Do you think the 15.45 percent coupon rate on the 2038 FGN bond offers attractive returns compared to other fixed-income investment options currently available?