How to invest in FGN Savings Bond

FGN Savings Bond is an investment product issued by the Debt Management Office (DMO) for the Federal Government of Nigeria. This product Targets the small savers or low-income households who will be unable to buy Treasury Bills (TB’s) due to the recent upwards review of minimum investing deposit for TB from N10, 000.00 to N50,000,000.00.

You can define a bond as debt security issued by a company, state, or federal government to the public to raise capital for a specific project. You lend money to the issuer at a specified interest rate and earn that rate quarterly or in a lump sum and get the principal back at the maturity of the bond. It usually has a coupon rate, coupon payment dates, and maturity date.

Just like Treasury Bills, investing in this Bond is riskless. The Government Guarantees the payment of accrued interest quarterly or every three months. The DMO started selling this Bond on behalf of the Federal Government on 13 March 2017, through the approved Government Stockbroker for the Bond, Stanbic IBTC and DMO accredited Distribution agents – Stockbrokers. After that initial offering, DMO has continued to make the Bond available for subscription for Nigerians every month. They usually sell this Bond for five days.

This article will teach you how to invest in FGN savings bond, the terms, and features of the Bond, the advantages of investing in the FGN  Savings Bond, the steps to invest in the Bond, how to redeem the Bond, and how to start trading the Bond. Let us begin this guide from the features of the FGN Savings Bond.

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Terms and features of the FGN Savings Bond

Here are the terms and features of the FGN savings bond

• Amount:Subscription of a minimum amount of N5,000 and a maximum amount of N50 million.
• Payment of Interest:DMO will pay the fixed interest every three months or every quarter.
• Tenor:2- or 3-years term.
• Frequency of Issuance:Issuance is Monthly by Offer for Subscription.
• Subscription Duration:The offer is for five days from the date DMO announce the offer.

Advantages of investing in the FGN Savings Bond

Below are the advantages:

• You will not pay tax on the interest income from the Savings Bond
• You can use the FGN Savings Bond Certificate as collateral for loans.
• You will have Liquidity as you will receive interest every quarter or 3-monthly interest payment.
• There is no risk as the FGN guaranteed the returns on investment
• You can save up for future projects by using the interest to buy more instead of spending it.
• You can trade the FGN  savings bond on the Nigerian Stock Exchange and sell anytime you like.
• It helps low-income savers who cannot invest the new minimum amount of Treasury Bills.
• It lets ordinary savers enjoy gains high-net-worth investors get in the capital market.
• When you buy at the Primary Market (offer period), you will get the proof of purchase in three working days directly to your CSCS statement.

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How to buy and invest in FGN Savings Bond

Follow these steps to Invest in FGN Savings Bond

1. Decide the amount to invest

You have to make a decision if this is a good investment for you. This is one of the safest investment in Nigeria.

2. Locate official bond agents

Find out the Official Bond Agents and invest through them. You can invest through the accredited Government Stockbroker for the Bond, Stanbic IBTC, and other DMO approved Distribution agents – Stockbrokers.
See the list of approved stockbroking firms. You can also get the list from the DMO website.

3. Find out issue dates

DMO announces the Coupon rate monthly on the first day of each month’s offer on its Website and some national newspapers. Find out the Primary offer issue date, opening and closing dates, Coupon rate, payment dates, and other details from the DMO website. You can also see this information from the offering circular on the Nigeria Stock Exchange’s Website.

For example, the rate for the recent offering on March 2 was 4.131%, and the closing date was March 6, 2020, settlement date was on 11 March 2020, and the first Coupon payment date is June 11, 2020.

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4. Open an account

If you do not have a Stockbroker approach any of The Exchange’s Dealing Member Firms to open a stockbroking account.

5. Submit required documents

Submit at least two photocopies of the following KYC documents (original to be sighted) to the Stockbroking firm you have selected:

1. Passport
2. National identity card
3. Driver’s license
4. Utility bill
5. Voters card
6. Your work photo identification card issued by a known employer plus employer’s tax identification from the Federal Inland Revenue Service (FIRS).

6. Stockbroker will get your account ready

Your Stockbroker will open an inhouse Account for you and a CSCS account for tracking your investment. The CSCS statement will represent the usual Bond certificate.

7. Download the subscription Form

Download the subscription Form from your Stockbroker or DMO website.

8. Fill the form

Fill the form showing the quantity you want to buy.

9. Make Payment

Pay the amount you want to invest in the bank account supplied by your Stockbroker.  At the close of the offer, your Stockbroker will transfer all funds it had collected to Stanbic IBTC – “the Only Government Stockbroker to FGN Bonds.”

10. Supply payment details

After you complete the payment, you can send an email to your Stockbroker to give them details of the amount you deposited and other necessary information. 

11. Wait for settlement day

Settlement day is the day the offer closes. Count that day as the transaction day + 3 working days, then ask your Stockbroker for a printout of your CSCS statement. You will see the amount you subscribed to, the quantity, and the Bond details.

How to Redeem the FGN Savings Bond

After learning how to invest in FGN savings bond, you would also want to know how to exit the investment, here is how to do it.

If you hold the investment in the Bond until maturity, you will receive the guaranteed face value or principal directly to your account.

If you do not want to wait until the Bond’s tenor expires, you can redeem or sell the investment through your Stockbroker at The Nigerian Stock Exchange (Secondary market) since they trade it there.

Collect a mandate form from your Stockbroker and fill it to authorize the sale of the Bond. After-sale, your Broker will credit proceeds to your account at the prevailing market rate. You could lose money if the interest rates in the country go up, then the face value of the bond will reduce.

For example, if you buy on March 11, 2020, and sell on June 11, 2020, you might get the principal you invested depending on the prevailing market price. As you do not want to wait until March 11, 2022 (the maturity of the Bond), you will only receive the interest you earned between March 11 and June 11, 2020.

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Buy More and Trade on The FGN Savings Bond

Now that you know how to invest in FGN savings bond, if you want to trade it, you could do so on the floor of The Nigeria Stock Exchange through your Stockbroker.

Stockbrokers can buy and sell the bonds in the secondary market. To trade the bonds, give your Stockbroker instructions to buy or sell for you. Note, you will pay some charges to the Stockbroker for trading for you.

Additional information

To get more Information on the FGN Savings Bond Issuance to contact your Broker or go to IBTC Stockbroker Limited.

FGN Savings Bond contact information

Address: Stanbic IBTC Stockbroker Limited office, IBTC Place, Walter Carrington Crescent, Victoria Island Lagos.

website or email to – stockbroking@stanbicibtc.com

Telephone: +234 (1) 014488801-29; +234 802 325 7777; +234 803 323 1941

Conclusion

In this post, we explained how to invest in FGN savings bond. You learned about the features of the FGN Savings Bond, the advantages of investing in the FGN Savings Bond, and the steps for investing and redeeming the investment, including how to trade the bond.

Look out for the advertisement for the sale of the Bond every month and start investing.

Tell us your experience after investing in the Bond by commenting on this post. Also, share this article and help to improve the savings culture of Nigerians.

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