The Federal Government of Nigeria has outlined specific identification requirements for investors interested in participating in its latest financial instrument, the Domestic FGN US Dollar Bond. This bond, part of a broader $2 billion program, aims to raise $500 million from both local and foreign investors in its first tranche.
According to a Frequently Asked Questions (FAQ) document provided by the Debt Management Office (DMO) on its website, all Nigerian citizens, including those residing abroad, must possess a Bank Verification Number (BVN) and a National Identification Number (NIN) to subscribe to the bond. This requirement applies to Nigerians living in the country as well as those in the diaspora who have foreign exchange savings abroad. Foreign institutional investors are also eligible to participate.
The DMO clarified that subscriptions to the bond must be made electronically or through financial institutions, and all payments must be made via electronic transfers into designated accounts. Cash payments will not be accepted. Additionally, for those intending to use funds from their domiciliary accounts for the subscription, the funds must have been in the account for at least 30 days before the application date.
The bond, which offers a 9.75 percent annual coupon rate over a five-year tenor, is designed to attract both domestic and international investors, with a minimum subscription amount of $10,000. Unlike traditional Eurobonds, which typically require a minimum investment of $200,000, this bond is more accessible to a broader range of investors.
The funds raised from this bond will be used to finance critical sectors of the Nigerian economy, as approved by the President on the recommendation of the Minister of Finance and Coordinating Minister of the Economy. The bonds will also be listed on the Nigerian Exchange Limited and the FMDQ Securities Exchange Limited, providing liquidity for investors who may wish to trade before maturity.
The bond is attractive to investors due to its tax exemptions, including exemptions from Companies Income Tax, Personal Income Tax, and Capital Gains Tax. Additionally, it meets the Central Bank of Nigeria’s criteria as liquid assets, making it eligible for inclusion in banks’ liquidity ratio calculations and suitable for pension fund portfolios.
The auction for this bond will remain open until August 30, 2024, with the settlement date set for September 6, 2024, when investors will have their purchases confirmed and interest will begin accruing.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, noted that this $500 million domestic dollar bond will help enhance Nigeria’s external reserves and stabilize the foreign exchange situation in the country.
