The Federal Government of Nigeria Savings Bond (FGNSB)
The Federal Government of Nigeria Savings Bond (FGNSB) is an investment product to be issued by the Federal Government of Nigeria (FGN) through the Debt Management Office (DMO) effective March 13 2017. The bond will be an addition to the FGN securities market and is a retail savings product accessible to all income groups. The purpose of the bond is to encourage a national savings culture and create an avenue for investors to benefit from the favourable returns available in the capital market. The FGNSB will be backed by the full faith of the Federal Government of Nigeria and is thus deemed to hold no default risk.
The FGNSB is expected to be issued monthly in tenors of 2 and 3 years via an offer for subscription. The subscription period would be opened for five working days, within which investors can submit their subscriptions through authorized distribution agents. The DMO has indicated that the first issue will be opened on March 13, 2017 and the offer would be opened for five days from date of announcement. The offer size and the applicable coupon rate will be determined and announced by the DMO.
Additional information on the FGNSB
- Subscription Amount: Minimum subscription of N5,000 with additional subscriptions in multiples of N1,000, subject to a maximum of N50,000,000
- Security: The FGNSB is backed by the full faith of the FGN and is thus deemed to hold no default risk.
- Subscription Mode: Investors are to subscribe through Dealing Member Firms of the Nigerian Stock Exchange (NSE) who have been duly accredited by the DMO to act as Distribution Agents (Our Firm, FBN Securities Limited is listed as one of the authorized distribution agents for the FGNSB)
- Coupon Payment: Payable every quarter with principal repayment at maturity
The DMO has also indicated that in view of the addition of the FGNSB, the new market structure for the FGN Securities Market will be as follows:
1. FGN Savings Bonds – minimum subscription of N5,000 and maximum of N50,000,000
2. Nigerian Treasury Bills – minimum subscription of N50,001,000
3. FGN Bonds – minimum subscription of N50,001,000
Benefits of Investing in the FGNSB
- The FGNSB offers steady returns on a quarterly basis as against the bi-monthly coupon payment of the regular FGN bonds, thus the FGNSB ensures a quicker return on investment (ROI)
- Low default risk as the FGNSB is backed by the full faith of the Federal Government
- Low investing capital requirement (minimum of N5,000)
- The investment can be used as collateral for loans since it is backed by the Federal Government of Nigeria
- The bonds will be listed on the NSE allowing for secondary market dealings
- Interest income are tax exempt