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The Federal Government will, on or before Friday, announce the result of the $500 million domestic dollar bond recently offered to the Nigerian public.

A source close to the deal disclosed this to BusinessDay under anonymity, saying the government will put up an official statement on this.

On August 19, 2024, the Federal Government announced the offering of a $500 million domestic US dollar bond with a maturity of five years and a fixed coupon of 9.75 percent per annum.

What this means is that the investors are lending money in dollars to the Federal Government for five years with a promise to receive 9.75 percent in interest every year.

The offer closed on August 30, 2024, and the result is expected on Friday. Most of the analysts polled by BusinessDay said they expected the offer to be oversubscribed.

The invested principal will be returned at maturity, ensuring the safety of the initial investment. Additionally, the bond enjoys tax exemption, making the interest income even more attractive, as investors can fully retain their earnings without deductions.

According to the Debt Management Office (DMO), the Federal Government of Nigeria (FGN) bonds continue to stand out as an attractive investment option for Nigerians, offering a unique blend of security and substantial returns. These bonds are particularly appealing to investors seeking a risk-free investment vehicle with multiple benefits.

One of the primary advantages of FGN Bonds is their risk-free nature. Backed by the full faith and credit of the Nigerian government, these bonds guarantee the safety of the principal amount. Furthermore, the interest payments on FGN Bonds are tax-exempt, providing investors with higher net returns compared to other taxable investment options.

Investors also enjoy relatively high and stable returns on FGN bonds, especially when compared to conventional bank deposits, which typically offer lower interest rates. Another key benefit is that the principal amount, which investors receive at maturity, can be used as collateral for securing credit facilities from banks and other financial institutions.

For those needing liquidity before maturity, FGN bonds offer flexibility. Bondholders can trade their bonds on the Nigerian Stock Exchange (NSE) and FMDQ OTC Securities Exchange for immediate cash. This trading option provides a crucial advantage, allowing investors to manage their cash flow needs effectively.

Additionally, FGN bonds qualify as liquid assets for banks in the estimation of their liquidity ratios by the Central Bank of Nigeria (CBN), making them valuable tools for maintaining financial stability.

FGN Bonds provide the government with an alternative source of funding, reducing reliance on external financing and promoting greater self-reliance. This not only helps in diversifying the economy but also enhances fiscal discipline by offering a non-inflationary means of funding budget deficits. The issuance of these bonds supports the development of infrastructure, which in turn has a multiplier effect on economic diversification.