The Federal Government at the weekend listed 14 tranches of its Federal Government of Nigeria’s Savings Bonds (FGNSBs) worth N9.801 billion on the Nigerian Exchange (NGX), providing a secondary window for existing and new investors to trade on the retail bonds.
The 14 bonds were issued between June, last year and January 2023 and comprised of two and three-year bonds with coupons ranging from 8.0 per cent to 13.3 per cent.
The government had raised N533.03 million in its maiden bond issuance in 2023, as it began the long haul to bridge the N11.34 trillion 2023 budget deficit.
A breakdown indicated that the government had allotted N145.42 million bonds with two-year tenor and N387.61 million bonds with three-year tenor.
Compared with similar debt issuance last December, the January 2023 allotment indicated that allotment for two-year bonds decreased by 51.17 per cent compared to N297.81 million allotted in December 2022 while allotment for three-year bonds declined by 57.34 per cent when compared with N908.65 million allotted in December 2022.
The government offered the January 2023 two-year sovereign retail bond at a coupon of 9.6 per cent per annum, 21.7 per cent below the 12.255 per cent offered on similar bond in December 2022. It also offered three-year FGNSBs at a coupon of 10.6 per cent per annum, 20.03 per cent below 13.255 per cent offered for similar bond last December.
While more investors appeared to favour the longer-tenored issuance, the number of successful subscriptions also declined considerably in January 2023 when compared with December 2022. Successful subscribers for two-year FGNSBs dropped from 153 in December 2022 to 88 in January 2023 while that of three-year bonds dropped from 294 in December 2022 to 205 in January 2023.
The January 2023 issuance was the 67th tranche of the savings bond, introduced in 2017.
The coupons or interest rates for the new issuances, which are traditionally paid quarterly, would be paid on April 11, July 11, October 11 and January 11.
The FGNSBs are designed to have most of the features of the existing sovereign bond but with other benefits to the bondholder, including low amount of minimum subscription, listing on stock exchange and trading on the bonds.
It will also be backed by the full faith of the Federal Government of Nigeria and is therefore deemed risk-free.
The coupon is paid on a quarterly basis, providing investors with a regular stream of incomes.
The FGNSB was introduced in 2017 as a mass instrument for nationwide mobilisation of savings and investments. Minimum subscription to the FGNSB is usually N5, 000 while the bond pays coupon or interest rate on a quarterly basis.
Usually, the minimum subscription to the bonds, offered at N1,000 per unit, is N5,000 or five units and in multiples of N1,000 thereafter, subject to a maximum subscription of N50 million.
GTI Securities Limited, one of the authorised distribution agents for the FGNSB, had explained that the savings bonds help to deepen national savings culture while providing opportunity to all Nigerians irrespective of income level to contribute to and benefit from national development.
According to the stockbroking firm, FGNSB enables all Nigerians opportunity to participate in and benefit from the favourable returns available in the capital market.
GTI Securities noted that the savings bonds are acceptable as collateral for loans by banks and can be sold for cash in the secondary market before maturity.
The bonds are usually listed on the stock exchange for trading, thus providing liquidity for investors who want to exit before maturity.
Savings bonds are good for savings towards retirement, marriage, school fees and house projects among other targets while assuring on its safety as the bonds are backed by the full faith and credit of the Federal Government.