The Debt Management Office (DMO), on behalf of the Federal Government, has announced the offer for a subscription to the November 2022 Federal Government Savings Bond.
A circular issued by the DMO and seen by Nairametrics explained that there are two tranches of issuances — 2-year and 3-year savings bonds, with interest rates of 12.492% and 13.492%, respectively.
This shows that the interest rates increased from 11.382% and 12.382% in October for the 2-year and 3-year Savings Bonds.
Higher interests explained: The FGN Savings Bond yield has been on the rise since the Central Bank of Nigeria adopted a hawkish monetary policy to combat inflation in the country.
Recall that the CBN raised the monetary policy rate (MPR) by a combined 400 basis points to 15.5% in a bid to tame the surge inflation rate, which had touched a 17-year high in September 2022. Following the MPR rate hike, savings bond rates have also been rising to reflect the changes in the benchmark rate.
Between May and November, the interest rate for the 2-year FGN savings bond has moved from 7.934% to 12.492% per annum, while the 3-year bond has seen its rate increase from 8.934% to 13.492% in the same period.
Key details to note: The opening date for subscription was November 7th, 2022 and the closing date is November 11th, 2022. The settlement date is November 16th, 2022 and coupon payment dates will be on February 16th, May 16th, August 16th, and November 16th 2023.
Unit of sale: 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.
A breakdown of the bonds shows that the 2-year FGN savings bond will be due on 16th November 2024, at 12.492% per annum and the 3-year FGN Savings Bond will be due on 16th November 2025, at 13.492% per annum.
According to the disclosure, the security is backed by the full faith and credit of the Federal Government of Nigeria and charged upon the general assets of Nigeria.
The FGN Savings Bond qualifies as securities in which trustees can invest under the Trustee Investment Act.
It also qualifies as Government securities within the meaning of the Company Income Tax Act (“CITA”) and Personal Income Tax Act (“PITA”) for Tax Exemption for Pension Funds, amongst other investors.
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