The Federal Government has announced that investors interested in its latest financial instrument must meet specific identification requirements to participate.
This information was provided in a Frequently Asked Questions (FAQ) document released by the Debt Management Office (DMO) on its website.
According to the FAQ, all Nigerian citizens, including those living abroad, must have a Bank Verification Number (BVN) and a National Identification Number (NIN) to subscribe to the domestic dollar bond, which was launched on Monday.
The bond is part of a larger $2 billion program, with the government aiming to raise $500 million from local and foreign investors in this first tranche.
Eligible investors include Nigerians residing in Nigeria, those in the diaspora with foreign exchange savings abroad, and foreign institutional investors.
The FAQ states, “A BVN and NIN are required for subscription. Nigerians in the diaspora can apply for both BVN and NIN if they don’t already have them.”
The DMO’s FAQ also clarifies that subscriptions to the Domestic FGN US Dollar Bond cannot be made using cash. Instead, payments must be made via electronic transfers to designated accounts.
Subscriptions to the bond can be made electronically or through financial institutions. Additionally, for those planning to use balances in their domiciliary accounts, the funds must have been in the account for at least 30 days before applying.
The bond proceeds 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.
With a 9.75% annual coupon rate over a five-year term, the bonds are targeted at both domestic and international investors, with a minimum subscription amount of $10,000.
This bond differs from traditional Eurobonds, mainly in its accessibility, with a lower entry threshold of $10,000 compared to the typical $200,000 required for Eurobonds.
The bond 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 DMO’s FAQ also notes that income from these bonds is exempt from several forms of taxation, including Companies Income Tax, Personal Income Tax, and Capital Gains Tax, making them an attractive investment option.
The bonds will be listed on the Nigerian Exchange Limited and the FMDQ Securities Exchange Limited, providing liquidity for investors who wish to trade before maturity.
The bond auction will remain open until August 30, 2024, giving investors ample time to participate in this offering.
The settlement date, when purchases will be confirmed and interest will begin accruing, is scheduled for September 6, 2024.
Minister of Finance and Coordinating Minister of the Economy, Wale Edun, earlier stated that the $500 million domestic dollar bond will boost external reserves and help stabilize the country’s foreign exchange situation.
