What is FGN savings bond?

An FGN savings bond is a bond issued by the Debt Management Office on behalf of the Nigerian government. The bond is tailored and targeted at retail investors and includes a guaranteed interest payment and repayment of the principal.

FGNSB is 100% safe as there is no default risk, it is backed up by the ‘full faith and credit’ of the Federal Government. Interest will be paid every quarter and the principal repaid at maturity.

Why is the government issuing a retail bond?

The government is issuing savings bonds targeted at ordinary Nigerians of all income groups, giving them the opportunity to earn an income through saving and investing. The bond is also expected to help promote the savings culture of Nigerians. Most Nigerians are thought not to save in banks because of very low interest rates.

Features:

  • FGNS Bond is issued first week of every month and targeted at retail investors.
  • The minimum investment will be N5,000 only (additional in multiples of N1,000) and a maximum of N50 million
  • It is issued in two (2) tenors of Two and Three years.
  • FGNSBs can be traded in the stock market just like shares.
  • Interest payment on FGNS Bond is made quarterly and thus helps boost investors’ cash flow.

Benefits:

  • It is 100% safe with guaranteed returns
  • Incomes earned from the instrument are tax-exempt
  • It provides steady income and a more competitive interest rate
  • The FGN Savings Bond Certificate can be used as collateral for loan
  • Good for savings towards retirement, marriage, school fees, house projects, etc.
  • It enables individuals to enjoy those benefits which accrue to high net-worth investors in the capital market.

 

How will the interest and principal be paid?

The interest will be paid quarterly into your bank accounts while the principal will be paid at maturity (the end of the tenor, two or three years) depending on what duration you subscribed to.

What if I decide to sell before maturity?

You need not hold on to the bond until maturity. If you need cash anytime during the duration of the bond, you can sell your bond in exchange for cash. However, the portion of the interest that you are not entitled to earn because you have sold will not accrue to you any longer.

However, note that should you wish to sell before maturity, you might pay a transaction fee. Also, because it is a bond, the price you get might be more or higher depending on the market value of the bond.

What is the difference between FGN savings bonds and treasury bills?

  • Unlike treasury bills, FGN savings bonds have a duration of between two and three years. Treasury bills are not more than one year with shorter tenors of 91 days and 182 days.
  • Treasury bills rates are determined by the forces of demand and supply. FGN saving bonds rates are currently determined by DMO.
  • Treasury Bills interest rates are paid upfront. For example, if you invest in treasury bills today, they will pay you all your interest today. For the FGN savings bonds, it will be at the end of the first quarter.
  • Unlike FGN savings bonds, treasury bills are not sold in the stock market.
  • Treasury Bills are no longer available to retail investors.

 

 

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