FG to pay cheapest rates in 1 year on August Saving Bonds
After lowering interest rates on Saving Bonds for three straight months, the Federal Government of Nigeria (FGN) will pay the cheapest rates in one year on borrowed funds from the August saving bond auction.
This became evident after the FGN disclosed an ongoing auction to receive offers for subscription for a two-year and three-year savings bonds for the month with interest rates at 10.301 percent and 11.301 percent per annum, respectively.
These interest rates promised on the two instruments are the cheapest since May 2018, and offer little or no spread from the nation’s inflation rate that moderated to 11.22 percent in June 2018, according to data compiled by Businessday.
FGN Savings Bond is a fixedincome instrument issued monthly to deepen the savings and investment opportunities of the Nigerian popu
lace and diversify funding sources for the government. The bond is also targeted at enhancing financial inclusion in the country, as income earned from it is exempted from taxes. With the FGN Savings Bond, low-income earners can save and earn more interests than regular bank savings.
The Debt Management Office (DMO), which is offering the debt instruments on behalf of the Federal Government, said the two-year tenor would be due on August 14, 2021, while the three-year savings bond would mature on August 14, 2022.
According to the state-owned debt agency, interested investors are expected to bid for the instruments at an auction, which commenced on Monday, August 5 and expected to end on Friday, August 9, with a settlement date of August 14, 2019.
To participate in the bidding process for the retail savings product, DMO advised investors to contact any of the 129 stockbroking firms appointed as distribution agents by the office.
The 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 million.
The DMO assured that the bonds are backed by the full faith and credit of the Federal Government of Nigeria and charged upon the general assets of the country, implying there is no risk of default.
Furthermore, the debt office guaranteed a bullet repayment of the principal on the maturity date with quarterly interest payment dates of November 14, February 14, May 14, and August 14.
Also, bondholders can use their investment as collaterals to obtain loans, while those who do not wish to hold on to the securities till the maturity date can trade their investment at the secondary market such as the Nigerian Stock Exchange and the FMDQ Securities Exchange.