Nigerian Government offers Savings Bonds

1 month ago
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The Nigerian Government opened a bid for two savings bonds of varying maturities on Monday, six days after it got the House of Representatives nod to borrow N1 trillion, 82 per cent of which will fund the 2022 supplementary budget.

The first, with a tenor of two years, is due by 15 February 2025, and carries an interest rate of 10 per cent per annum, while the other maturing on 15 February 2026, is offered at an interest of 11 per cent per annum, according to a statement by the debt office.

Subscription will be welcomed within a five-day window starting Monday and ending Friday, with Wednesday 15 February planned as the settlement date.

Debt servicing is expected to eat up 123.4 per cent of Africa’s largest economy’s revenue this year, according to the World Bank.

Finance Minister Zainab Ahmed told Bloomberg TV last month that Nigeria’s debt trajectory is sustainable, noting the government plans to cut the debt service-to-revenue ratio to 60 per cent this year.

While no mention is made of how much will be raised from the debt issuance, the move could help the cash-starved government narrow a funding gap of N11.3 trillion ($24.5 billion) in this year’s spending plan.

READ ALSO: Nigeria offers three-year bonds at 9.35% interest rate

Retail investors could invest as little as N5,000 and also have the chance to trade the bonds ahead of maturity at the secondary market via their brokers.

The two bonds are offered at “N1,000 per unit subject to a minimum Subscription of N5,000 and in multiples of N1,000 thereafter, subject to a maximum subscription of N50,000,000,” the Debt Management Office said in the document seen by PREMIUM TIMES.

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Interests are payable every quarter, with the coupon payments scheduled for 15 May, 15 August, 15 November and 15 February.

In the last week of January, Moody’s Investors Service downgraded Nigeria’s sovereign credit ratings further into its non-investment grade, citing fiscal vulnerabilities and the government’s worsening debt profile.

That sent the country’s dollar-denominated bonds crashing in the days that followed, with longer-dated bonds being the worst hit.

According to Fitch’s projection, interest payments on Nigeria’s debt as a share of revenue could reach 44.1 per cent this year, putting it only behind distressed neighbours Ghana and Sri Lanka, which declared bankruptcy last year.

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