The Federal Government of Nigeria has outlined specific identification requirements for its new financial instrument, the Domestic FGN US Dollar Bond, according to a Frequently Asked Questions (FAQ) document released by the Debt Management Office (DMO) on its website.
To subscribe to the Domestic FGN US Dollar Bond, which was launched on Monday as part of a broader $2 billion program, Nigerian citizens—whether residing in Nigeria or abroad—must have both a Bank Verification Number (BVN) and a National Identification Number (NIN). The first tranche of this program aims to raise $500 million from both local and international investors.
Eligible participants include Nigerian residents, Nigerians in the diaspora with foreign exchange savings abroad, and foreign institutional investors. The FAQ specifies: “A BVN and NIN are required for subscription. Nigerians abroad can apply for both if they do not already possess them.”
Subscriptions to the bond cannot be made in cash; all transactions must be conducted through electronic transfers to designated accounts. Investors can make subscriptions electronically or via financial institutions. Additionally, if using funds from domiciliary accounts, the money must have been in the account for at least 30 days before applying.
The bond, which carries a 9.75% per annum coupon rate over a five-year term, is designed 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.
With a minimum subscription amount set at $10,000, this bond offers a lower entry threshold compared to traditional Eurobonds, which typically require a minimum of $200,000. It also qualifies as a liquid asset under Central Bank of Nigeria (CBN) criteria, making it eligible for inclusion in banks’ liquidity ratio calculations and suitable for pension fund portfolios.
The FAQ also highlights that income from these bonds is exempt from Companies Income Tax, Personal Income Tax, and Capital Gains Tax, making them a favorable investment option. The bonds will be listed on the Nigerian Exchange Limited (NGX) and the FMDQ Securities Exchange Limited, providing liquidity for investors wishing to trade before maturity.
The auction for the Domestic FGN US Dollar Bond is open until August 30, 2024, with the settlement date set for September 6, 2024, when interest will begin accruing. Minister of Finance and Coordinating Minister of the Economy, Wale Edun, stated that the $500 million bond aims to enhance external reserves and stabilize the foreign exchange situation in Nigeria. The government hopes to secure up to $1 billion through this bond auction.
