On BU$I₦£$$ DIG£$T this morning, September 9, 2021
*MORE INFORMATION ABOUT FGN BONDS*
Caveat: Kindly read yesterday’s post before reading today’s.
When you buy FGN Bonds, you are lending to the FGN for a specified period of time.
FGN Bonds are debt securities (liabilities) of the Federal Government of Nigeria (FGN) issued by the Debt Management Office (DMO) for and on behalf of the Federal Government. The FGN has an obligation to pay the bondholder the principal and agreed interest as and when due. When you buy FGN Bonds, you are lending to the FGN for a specified period of time. The FGN Bonds are considered as the safest of all investments in domestic debt market because it is backed by the ‘full faith and credit’ of the Federal Government, and as such it is classified as a risk free debt instrument. They have no default risk, meaning that it is absolutely certain your interest and principal will be paid as and when due. The interest income earned from the securities are tax exempt.
Why FGN issue Bonds?
The Federal Government of Nigeria (FGN) issues Bonds for the following reasons:
¶To finance government fiscal deficits in a non-inflationary and sustainable manner.
¶To enhance fiscal discipline of the Government.
¶To refinance maturing debt obligations of the Federal Government.
¶To establish benchmark yield curve, this serves as reference for pricing bonds issued by other bodies, especially the private sector issuers.
¶To develop and ensure liquidity in the domestic bond market on a sustainable basis.
¶To enhance and deepen the savings and investment opportunities of the populace.
¶To sustain the development of other segments of the Bond market.
¶To diversify government financing sources
Features of FGN Bonds
¶To finance government deficits in a non-inflationary and sustainable manner
¶To enhance fiscal discipline and for the management of monetary policies
¶To restructure the existing debt stock of short term debt to longer term obligations
¶To establish a benchmark yield curve, which acts as a reference for pricing other bonds issued by other bodies
¶To develop the domestic bond market on a sustainable basis
¶To enhance and deepen the savings and investment opportunities
_If you learnt anything from this, kindly share with someone out there._
_*Dr. Emmanuel Idenyi Shaibu*_
_animn, ace, f.hcd, f.dss, m.frcn, fimc, cmc, cms, FAiPA, DPA, ACCrFE_
The Millennium Entrepreneur