FEDERAL SAVINGS BOND: FREQUENTLY ASKED QUESTIONS

Here are Answers to Some Frequently Asked Questions on Federal Savings Bond

Frequently Asked Questions on Federal Savings Bond
 

What is Federal Government Savings Bond?

The Federal Government Savings Bond (FGN Savings Bond) is a retail savings product that will be accessible to all income groups. The Savings Bond is being introduced by the Debt Management Office on behalf of the Federal Government of Nigeria to further encourage an all-inclusive participation in investments.

What is the mode of issuance of the FGN Saving bonds?

This is done through Offer for Subscription at an interest rate to be determined by the Debt Management Office (DMO) and it is opened to the investing public for 5 days from the date of announcement.
The first issuance came up in March 2017.

What is the minimum amount that can be invested in the FGN Saving bonds?

Minimum subscription amount is N5,000 with additions in multiples of N1,000, subject to a maximum of N50,000,000.

What is the frequency of the issuance and the tenor of the Federal Government Saving bonds?

It will be issued monthly in tenors of 2 and 3 years.

How do I make payment to invest in the Savings bond?

 Funds can be transferred through your stockbrokers.

Will cash be accepted as a means of payment for FGN Saving bonds?

Cash will NOT be accepted. Only transfers will be accepted.

What will be the returns on the investment?

The interest rate for the bond will be fixed by the DMO based on market parameters and coupon will be paid quarterly.

Can I sell or redeem my Saving Bond before maturity?

Yes.
The bond can be traded on the floor of The Nigerian Stock Exchange through Stockbrokers.

What are the benefits of FGN Saving bonds to the Investors?

1. The accruing Interest income (coupon) is tax exempt.

2. They are paid quarterly and directly into bond holder’s bank account.

3. The Bond is acceptable as collateral for loans by Banks.

4.Easy mode of divestment. This means it can be sold or traded in the secondary market on the floor of the Nigerian Stock Exchange.

5. Good for savings toward retirement, marriage, school fees, house projects, etc.

Is the FGN Savings Bond Safe?

The savings bond is backed by the “full faith and credit of the Federal Government of Nigeria”.

What are the benefits of FGN bonds to the economy?

1. It fosters economic development by promoting the use of long-term funds for long-term investment.

2. It serves as efficient way of mobilizing domestic financial resources for productive investment in a non-inflationary manner.

3. It provides basic infrastructure for the development of the financial system and the overall economy. 

4. It allows self-reliance of the country by reducing over reliance on short-term borrowing from CBN and commercial banks.

5. It serves as a diversified portfolio investment outlet to corporate and individual investors.

What are the laid procedures for buying the Savings bond?

1. Investors are required to complete and submit subscription forms and make payment to the distribution agents (Stockbroking Firms).

2. A CSCS account must be opened by each investor through a stockbroking firm for the lodgment of the FGN Savings bond before the offer and to enable the retail trading of the bonds on the floor of The Nigerian Stock Exchange.

3. Client will be required to provide KYC documents before opening the account.

However, where an investor already has a CSCS account, there will be no need to open another account for bonds trading.

4. Investors will be required to provide bank account details at the point of account opening for coupon payment.

What will be the settlement process of the Savings bond?

The settlement for the savings bond will be T + 3, which implies that Investor’s CSCS account will be credited on Wednesday of the week after the auction.
Investors will receive alert from CBN on day T +3 which will serve as additional evidence of subscription.

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