Fed Govt Rolls Out N5,000 Savings Bonds Today
The Federal Government will today sell the first tranche of its newly introduced Federal Government of Nigeria Savings Bond (FGNSB). The minimum subscription for the FGNSB has been fixed at N5, 000 while the maximum subscription for the new security is fixed at N50 million.
The Debt Management Office (DMO), which oversees issuance of Federal Government bonds, will be issuing the savings bonds on behalf of national government. Parties to the debt issue confirmed at the weekend that all arrangements have been concluded for the successful issuance of Nigeria’s first-ever savings bonds.
Executive Director, Capital Market Division, Nigerian Stock Exchange (NSE), Mr. Haruna Jalo-Waziri, said to ensure that the maiden offer reaches the last-mile subscribers, the DMO has accredited 87 stockbroking firms of the NSE to market and distribute the savings bonds.
Several stockbroking firms had over the past three weeks been sensitising the investing public about the savings bonds, raising optimism that the initial launch will be a huge success.
Accredited stockbroking firms, who had launched marketing portals for the FBNSB, included Cowry Asset Management Limited, Capital Bancorp, GTI Securities Limited, Capital Assets Limited, Afrinvest Securities and FSDH Securities.
Vice Chairman and Chief Executive Officer, Capital Assets Limited, Mr. Ariyo Olushekun, indicated that the government would make enough room to accommodate bids from the retail investors in line with the issuance objectives of widening investors’ base and deepening domestic participation in government securities.
The savings bond will bear all the regular features of a national bond, including the zero default rate of a sovereign issuance, fixed coupon or interest rate, privileges and exemptions from certain taxes and levies, as outlined by the Central Bank of Nigeria (CBN), Federal Inland Revenue Services (FIRS) and other government ministries, departments and agencies (MDAs).
The FGNSB is deliberately targeted at the lower income earners as part of government’s plan to encourage savings and reward the low-income savers with more income from their savings compared with savings accounts with banks.
The bonds will be issued with a tenor (period) of between two to three years and a minimum size (amount that can be purchased) of investment of N5,000 and maximum of N50 million.
The interest rate, which will be fixed, will be paid quarterly, enhancing the attraction of the savings bond as grassroots instrument for the public.
The attractions of the savings bonds also included guaranteed returns, competitive fixed interest rate, tax exemption for the interest incomes and collateral for loans.
The retail savings bonds will, in addition, encourage financial inclusion among low income households and enable the general Nigerian public to enjoy those benefits which accrue to high net-worth investors in the capital market.
With the collateralisation of the bond certificate, subscribers can use the bond certificate as guarantee and collaterals where such are required in transactions with the DAs, financial institutions and private organisations.
Investors will also be able to purchase the savings bond in small units through physical offices and several online platforms. After the closure of the primary issue for the savings bond, retail investors will be able to buy and sell the bonds through the Nigerian Stock Exchange (NSE).
Jalo-Waziri noted that with the FGNSB backed by the full faith and credit of the Federal Government of Nigeria, the bonds would deepen the national savings culture, provide opportunity to all citizens irrespective of income level to contribute to national development as well as enable all citizens to participate in and benefit from the favorable returns available in the capital market.
He added that the FGNSB will also help to diversify funding sources for the government.
“The 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 FGNSB 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 two-way quotes throughout the trading session,” Jalo-Waziri said.
According to him, with an estimated population in excess of 170 million, Nigeria could be seeing yet another paradigm shift where ordinary Nigerians irrespective of their income levels can pool resources to boost government’s effort to mobilize domestic capital required to fund priority sectors of the economy and ultimately serve as a catalyst for economic growth.