FG mandates identification requirements for investors in new domestic Dollar bond

The Federal Government has outlined specific identification requirements for investors interested in its newly issued financial instrument.

According to a document from the Debt Management Office (DMO) published on its website, individuals seeking to invest in the domestic dollar bond must meet certain criteria.

As detailed in the Frequently Asked Questions (FAQ) section, all Nigerian citizens, including those living abroad, are required to have a Bank Verification Number (BVN) and a National Identification Number (NIN) to participate in the bond, which was launched on Monday.

This bond is part of a larger $2 billion program, with the government aiming to raise $500 million in the first tranche from both local and foreign investors.

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

The DMO document emphasizes, “A BVN and NIN are mandatory for subscription. Nigerians in the diaspora who do not have these identifiers can apply for them.”

Furthermore, the FAQ clarifies that subscriptions to the Domestic FGN US Dollar Bond cannot be made using cash. All payments must be completed through electronic transfers to designated accounts, and subscriptions can be made either electronically or via financial institutions.

For those utilizing domiciliary account balances, the funds must have been in the account for at least 30 days before applying.

The bond proceeds will be used to fund 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.

With a 9.75% annual coupon rate over a five-year period, the bonds are accessible to both domestic and international investors, requiring a minimum subscription of $10,000.

This offering differs from traditional Eurobonds, which typically have a much higher entry threshold of $200,000, making it more accessible to a wider range of investors.

Additionally, the bonds qualify as liquid assets under the Central Bank of Nigeria’s criteria, making them eligible for banks’ liquidity ratio calculations and suitable for pension fund portfolios.

The income generated from these bonds is also exempt from various taxes, including Companies Income Tax, Personal Income Tax, and Capital Gains Tax, enhancing their attractiveness as an investment option.

The bonds will be listed on the Nigerian Exchange Limited and the FMDQ Securities Exchange Limited, providing liquidity for investors who wish to trade before maturity.

The subscription window for this bond will remain open until August 30, 2024, with a settlement date of September 6, 2024, when investors’ purchases will be confirmed and interest will start accruing.

According to Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, this $500 million domestic dollar bond is expected to bolster Nigeria’s external reserves and contribute to stabilizing the country’s foreign exchange situation.