The Nigerian government has started a new plan to make money by creating Series I Domestic USD Bonds. They want to get at least $500 million from people both inside and outside the country.
From the information available, the government actually hopes to get up to $1 billion if many people decide to invest in these bonds.
However, launching this plan now is interesting because some of Nigeria’s older international loans are not doing well. They are among the worst investments according to a list by Bloomberg.
Nigeria’s $2 Billion Bond Program
The new bond plan can go up to $2.0 billion in total. The government can even increase this amount if they want.
These bonds will last for five years. This gives people a way to invest their money for a medium amount of time and get steady returns.
The interest rate of these bonds will be similar to those of Nigeria’s Eurobonds, so investors will earn competitive returns.
People who invest will get their interest money twice a year. This regular payment makes the bonds more attractive.
After five years, investors will get back all the money they originally put in, in US dollars.
Anyone living in Nigeria, even if they are not Nigerian, as well as Nigerians living abroad, can invest in these bonds. Big investment companies can also buy these bonds.
This bond is also a good choice for pension funds, making it available to a wide range of people.
You can start investing with at least $10,000. After that, you can add more money in amounts of $1,000.
People can start buying these bonds in August 2024. The exact dates will be announced later. The bonds will be delivered to buyers also in August 2024.
How the Government Will Use the Money
The money made from these bonds will be spent on important sectors. The President will decide which sectors get the money based on advice from the Finance Minister. But, the National Assembly has to approve this.
It says: “As stated in the Presidential Executive Order, the net proceeds of the bonds and its accretion shall be ring-fenced and invested in critical sectors to be approved by the President on the recommendation of the Minister of Finance, subject to appropriation by the National Assembly (“NASS”).”
We still don’t know exactly which sectors will get this money.
People who buy these bonds won’t have to pay income tax on the interest they earn. There are other tax benefits too, according to a notice from the Federal Inland Revenue Services (FIRS).
The bonds will also be listed on the Nigerian Exchange Limited (NGX) and the Financial Market Dealers Quotation (FMDQ). This makes it easy for many investors to buy and sell these bonds.
Important Information
The Minister of Finance, Wale Edun, said that the government plans to start with $500 million in these new domestic USD bonds in the next three to four weeks.
He added that the government does not currently plan to raise more money through Eurobonds. This decision may change based on how well these new bonds do.
The International Monetary Fund (IMF) is worried about Nigeria’s plan to issue domestic dollar bonds. They believe this could put more pressure on the naira and make borrowing in naira more costly.
The IMF also said that creating these bonds to improve dollar availability in official markets could complicate things.