April 12, 2021

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Fed Govt raises savings bonds’ returns

2 min read

By Taofik Salako, Deputy Group Business Editor

The Federal Government is offering about 23 per cent increase on the interest or coupon payable on its current savings bond issue as government continues to increase returns on its debt issues in order to enhance the attractiveness of the sovereign bonds.

Latest bond circular on the March 2021 issuance of the Federal Government of Nigeria Savings Bond (FGNSB) , which subscription closes on Friday, March 5, 2021, showed an increase of 22.95 per cent on the coupon payable on two-year savings bonds and 18.55 per cent increase on coupons payable on three-year savings bonds.

The Two-Year FGN Savings Bond due March 10, 2023 carries a coupon of 5.181 per cent per annum as against 4.214 per cent for a similar bond issuance in February 2021.

Also, the Three-Year FGN Savings Bond due March 10, 2024 carries a coupon of 6.181 per cent yearly compared with 5.214 per cent listed for a similar three-year bond issued in February 2021.

The ongoing application list, which opened on Monday, March 1, 2021, is expected to close on Friday, March 5, while settlement will be done on Wednesday, March 10.

Traditionally, minimum subscription to the FGNSB, usually offers at N1,000 per unit, is N5,000 or five units and in multiples of N1,000 thereafter, subject to a maximum subscription of N50 million.

The bond pays coupon or interest rate on a quarterly basis. The coupon payment dates for the ongoing offers will be June 10, September 10, December 10, March 10 of every year respectively. The bond shall be redeemed at maturity through bullet repayment.

The Federal Government had last month raised N673.12 million and N1.125 billion through its two-year and three-year bonds respectively. A total of 673,120 units of a two-year savings bond valued at N673.12 million were listed at par value of N1,000 per unit. The two-year bond carried a coupon of 4.214 per cent with maturity at February 10, 2023.

Also, a total of 1.125 million units of a three-year savings bond valued at N1.125 billion at a par value of N1,000 were listed with a coupon of 5.214 per cent and maturity on February 10, 2024. The government had raised N18.14 million and N78.05 million through two and three year bonds in January 2021.

The February bonds’ coupons, like the latest offers, had shown continued increase in yields on government securities.The two-year and three-year savings bonds issued in January 2021 had carried coupons of 2.19 per cent and 3.19 per cent.

A similar two-year FGNSB issued last November and due on November 11, 2022 had offered a coupon of 1.759 per cent yearly. The three-year FGNSB issued last November and due November 11, 2023 had carried a coupon of 2.759 per cent.

The FGNSB was introduced in 2017 as a mass instrument for nationwide mobilisation of savings and investments.