Bond subscription: FG demands BVN, NIN for $500m

Investors interested in purchasing the Federal Government’s newest financial instrument are required to divulge certain identity requirements in order to take part in the exercise, according to the Federal Government.

It made this information available on its website in a Frequently Asked Questions paper that was supplied by the Debt Management Office.

All Nigerian nationals, including those who live overseas, are required by the FAQ to have both a National Identity Number and a Bank Verification Number in order to purchase the local dollar bond that was released on Monday.

The bond, part of a broader $2bn programme, is issued domestically as the government seeks $500m from local and foreign investors in this first tranche.

Eligible participants include Nigerians resident in Nigeria, those in the diaspora with foreign exchange savings abroad, and foreign institutional investors.

The FAQ read in part, “A BVN and NIN are required for subscription. Nigerians in diaspora can apply for both BVN and NIN if they don’t already have them.”

The FAQ from the DMO also clarifies that subscriptions to the Domestic FGN US Dollar Bond cannot be made by cash.

Instead, all payments must be made through electronic transfers into designated accounts.

According to the FAQ, subscriptions to the bond can be made electronically or through financial institutions.

Also, for those intending to use balances in their domiciliary accounts for subscription, the funds must have been in the account for at least 30 days before the application date.

The bond 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.

At a 9.75 per cent per annum coupon rate over a five-year tenor, the bonds are targeted at both domestic and international investors, with a minimum subscription amount of $10,000.

This bond differs from traditional Eurobonds, primarily in accessibility, as it has a lower entry threshold of $10,000 compared to the typical $200,000 required for Eurobonds.

It also meets the Central Bank of Nigeria’s criteria as liquid assets, making it eligible for inclusion in banks’ liquidity ratio calculations, and is also suitable for pension fund portfolios.

The DMO’s FAQ reveals 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.

Also, 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 will remain open until August 30, 2024, giving investors a sufficient window to participate in this offering.

The settlement date, when investors will have their purchases confirmed and interest will begin accruing, is set for September 6, 2024.

The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, earlier said that the $500m domestic dollar bond will enhance external reserves and help stabilize the foreign exchange situation in the country.