Nigeria Releases $500m Domestic Dollar Bond with Stringent Identification Requirements
The Federal Government of Nigeria has announced a domestic dollar bond issuance, open to local and foreign investors, to raise $500 million. In a Frequently Asked Questions (FAQ) document released by the Debt Management Office, the government emphasized the need for stringent identification requirements for investors seeking to participate in the exercise.
To subscribe to the Domestic FGN US Dollar Bond, which was issued on Monday, Nigerian citizens, including those residing abroad, must possess both a Bank Verification Number (BVN) and a National Identification Number (NIN). Nigerian citizens in the diaspora who don’t already have these documents can apply for both BVN and NIN.
The FAQ also clarifies that subscriptions cannot be made by cash, with all payments required to be made through electronic transfers into designated accounts. Investors can choose to make payments electronically or through financial institutions. Additionally, if using balances in their domiciliary accounts, the funds must have been in the account for at least 30 days before the application date.
The bond, which forms part of a broader $2 billion programme, is targeting both domestic and international investors. With a 9.75% annual coupon rate over a five-year tenor and a minimum subscription amount of $10,000, it offers a competitive investment opportunity.
“This bond differs from traditional Eurobonds primarily in accessibility, with a lower entry threshold of $10,000 compared to the typical $200,000 required for Eurobonds,” said the FAQ. “The bond also 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.”
Income from these bonds is exempt from several forms of taxation, including Companies Income Tax, Personal Income Tax, and Capital Gains Tax. The bonds will be listed on the Nigerian Exchange Limited and the FMDQ Securities Exchange Limited, offering liquidity to investors who wish to trade before maturity.
The auction for this bond remains open until August 30, 2024, giving investors a sufficient window to participate. The settlement date, when investors will have their purchases confirmed and interest will begin accruing, is set for September 6, 2024. According to the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, the bond will enhance external reserves and help stabilize the foreign exchange situation in the country.
