• FGN Savings Bond to Debut Tomorrow

The Federal Government through the Debt Management Office (DMO) will tomorrow record another milestone in the capital market with the debut of the Federal Government of Nigeria (FGN) Savings Bond. The offer, available exclusively on the Nigerian Stock Exchange, will be opened for five days effective Monday, March 13, 2017 and will be issued monthly thereafter. To ensure a successful take-off, DMO has accredited 87 stockbroking firms of the Nigerian Stock Exchange to market and distribute the Savings Bond.

The retail product will be issued monthly in tenors of two and three years, with quarterly payment of interest to investors. The minimum subscription amount is N5, 000.00 with additions in multiples of N1,000.00, subject to a maximum of N50,000,000.00. The bond is backed by the full faith and credit of the federal government. With a T+3 transaction settlement cycle, the bond, amongst several objectives was purposed to deepen the national savings culture, provide opportunity to all citizens irrespective of income level to contribute to National Development, enable all citizens participate in and benefit from the favorable returns available in the capital market and more importantly diversify funding sources for the government. A brokerage account is, however, required to participate in this bond programme.

The debut of this savings bond puts Nigeria in the league of sovereigns like Sweden, Thailand, Slovenia, Indonesia, United States, and United Kingdom with savings bond. Already, capital market operators are excited about the product and believe it would give fillip to the capital market particularly that has witnessed many retail investors depart since the downturn. Prior to now, the bond market is predominantly available to high networth investors to the detriment of low income investors. With the entry level for the savings bond, even students can afford to play in the space.

In an exclusive chat, Executive Director, Capital Market, NSE, Haruna Jalo-Waziri, said, “NSE Retail Bond Market was launched in 2012 with the aim of providing retail investors access to high quality debt instruments, as well as afford them portfolio diversification opportunities in an efficient and reliable way. The Launch of the Federal Government National Savings Bonds is consistent with the NSE’s commitment to grow domestic investor participation in the Nigerian Capital Market, and it is our pleasure to have worked with the DMO and the dealing member community to deliver yet another innovative product that will foster financial inclusion in Nigeria. After the offer closes, the bond will be listed on the NSE and can be traded on our Retail Bonds Market. DMO Accredited Distribution Agents and the Government Broker will provide liquidity by continuously making 2-way quotes throughout the trading session”

With an estimated population in excess of 150million, if the targeted audience successfully offtake this product, we shall be seeing yet another paradigm shift where ordinarily Nigerians irrespective of their income levels can pool resources to boost government’s effort to mobilise domestic capital required to fund priority sectors of the economy and ultimately serve as a catalyst for economic growth.

Tomorrow’s savings bond offer is coming on the back of recent innovative capital market instruments deployed by the federal government. Last week, it listed the first FX denominated bonds, Eurobond, on local bourses NSE and FMDQ to the delight of many capital market watchers. The bond, which was issued under Nigeria’s newly established Global Medium Term Note programme, is the third in the series after the ones in 2011 and 2013. The Notes will bear interest at a rate of 7.875 per cent and will mature on February 16, 2032, with a bullet repayment of the principal. The Eurobond is part of FGN’s funding strategy for its 2016 capital expenditure plan and will be utilised to fund key infrastructure projects, in line with its economic plan. With the minimum denomination to participate set at US$200,000 and increment of US$1000, only the medium to high income level investors could subscribe to the bond offer.

Speaking at the listing on NSE, the bourse’s Executive Director, Market Operations and Technology, Mr. Ade Bajomo, commended the DMO for listing the Eurobond on the nation’s bourse. He noted that the domestic listing would diversify its investors’ base by giving Nigerian institutional investors access to the bond.

Bajomo further remarked that, “The listing of the dollar-denominated bond on the exchange will boost price discovery and liquidity in the local market as well as help attract reliable long-term foreign currency denominated funds into the financial market. It will also set the foundation for raising and listing more foreign denominated securities in Nigeria which will open up additional capital raising options for issuers and portfolio diversification opportunities to investors”.

Going by the earlier commitment of the former Minister of Environment, Mrs Amina J. Mohammed, players in the capital market will yet have another product, the sovereign green bond join the list for discerning investors to put their funds in projects that supports sustainable projects to enhance living, protect our climate and environment. Last month, this aspiration received a boost from participants when the federal government met with investors and capital markets operators in Lagos for the first-ever Green Bonds Conference themed “Green Bonds: Investing in Nigeria’s Sustainable Development” and organised by the Federal Ministry Environment in collaboration with Federal Ministry of Finance and Debt Management Office. The event was headlined by the Acting President Yemi Osinbajo. Proceeds from the green bonds will fund identified projects in energy, agriculture, transport (FCT) and environment with international investors and business leaders expected to lead at the event.