FG borrows N1.48tn via bonds in Q1 2022

The Federal Government borrowed N1.48tn from bond investors through Federal Government bonds between January and March 2022, according to an analysis of the FGN Bond Auction results available on the website of the Debt Management Office.

Bond oversubscriptions hit N1.03tn within the period under review, indicating the investors’ increasing appetite for FGN bonds.

An analysis of the breakdown for each month showed that Federal Government bonds for January worth N150bn were oversubscribed by N175.24bn.

The total subscription received from investors for the bonds was N325.24bn, comprising N111.19bn for the 12.50 per cent FGN January 2026 bonds and N214.05bn for the 13 per cent FGN January 2042 bonds.

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The auction result added that out of the 112 and 142 total bids for the tenures, 75 and 85 bids were successful.

The Federal Government bonds for February worth N150bn were also oversubscribed by N407.72bn. The total subscription received from investors for the bonds was N557.72bn, comprising N325.40bn for the 12.50 per cent FGN January 2026 bonds and N232.32bn for the 13 per cent FGN January 2042 bonds.

The auction result added that out of the 230 and 151 total bids for the tenures, 46 and 119 bids were successful.

The Federal Government bonds for March worth N150bn were equally oversubscribed by N448.42bn. The total subscription received from investors for the bonds was N598.42bn, comprising N231.02bn for the 12.50 per cent FGN January 2026 bonds and N367.40bn for the 13 per cent FGN January 2042 bonds. The auction result added that out of the 170 and 227 total bids for the tenures, 97 and 141 bids were successful.

The PUNCH had reported that investors committed about N3.36tn to Federal Government bonds between January and December 2021.

In addition, bond oversubscriptions hit N1.61tn last year, which is slightly higher than the oversubscription reached in the first three months of 2022.

Experts have said that investors will likely go for FGN bonds over other bonds since the bonds qualify for tax exemption

In December 2011, the Federal Government issued the Companies Income Tax (Exemption of Bonds and Short-Term Government Securities) Order, 2011, and the Value Added Tax (Exemption of Proceeds of the Disposal of Government and Corporate Securities) Order, 2011.

The orders exempted the interests and proceeds from the disposal of short-term FG securities and bonds, from CIT and VAT respectively. These covered bonds issued by the federal, state, and local governments and their agencies, and by corporate and supranational entities.

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According to the gazetted copies of the orders, the exemptions will be effective for a period of 10 years starting from January 2, 2012.

However, bonds issued by the FG will continue to enjoy the CIT and VAT exemptions after the expiration of the 10-year term, which expired on January 2, 2022. The tax exemptions make the FGN bonds more attractive to investors than other bonds.

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