Home / Business and Economy / Investment in FGN securities profitable, risk-free – DMO

Investment in FGN securities profitable, risk-free – DMO

 

DMO Director-General, Patience Oniha

By Kadiri Abdulrahman

Abuja, May 31, 2022

The Debt Management Office (DMO) says it is advisable for Nigerians to invest in the various Federal Government Securities, as they are profitable and risk-free.

The Director-General of the DMO, Patience Oniha,  said this in an interview with the News Agency of Nigeria (NAN) on Tuesday in Abuja.

Oniha said the various Federal Government of Nigeria (FGN) Securities, apart from raising funds to finance government projects, also offer attractive investment opportunities for Nigerians.

According to Oniha, the Federal Government, through the DMO, issues the bonds and makes periodic interest payments to the investors, while the principal is paid at the end of each tenor.

“The Federal Government has various investment platforms like the FGN Bond, FGN Savings Bond, Treasury Bills, the Green Bond, the Sovereign Sukuk and Eurobond.

“One function of these FGN  securities is to raise capital to finance deficits in the budget, and also to raise funds to execute critical infrastructural projects.

“They are backed by full faith and credit of the Federal Government of Nigeria, and are default  risk-free,” she said.

She said that the FGN Securities also contributed to the development of the domestic capital market, adding that they served as benchmark for other private institutions to issue their own securities.

“They enhance the savings and investment opportunities of the populace, thereby promoting  financial inclusion.

“They also attract foreign investors into the domestic financial market,  to refinance maturing domestic  debt and to diversify sources of funding for the Federal Government.

“You can use them as collateral to obtain loans from banks and other financial institutions, and they help in diversification of investment portfolio.

“They are also a source of steady income,  as investors’   interests are paid every six months or every three months, and they are tradable on the stock exchange, ” she said.

“FGN Bond is the flagship; it is the longest of the existing FGN Securities.  It offers medium term to long term investments , from five years to seven years,  to 10 years,  20 years and 30 years.

“It is offered every month,  with minimum subscription of N50 million, and  in multiples of N1000 thereafter, and coupon payment  are made every six months.

“The second product,  the FGN Savings Bond is designed with retail investors in mind.

” It is issued every month, with a minimum subscription of N5,000 and in multiples of N1000, subject to a maximum of N50m ” Oniha said.

She said that the Eurobond was issued in dollars,  and designed to provide exposure to foreign investment that stayed in the country.

“When you invest in Eurobond you are owning a dollar-denominated asset, and that adds foreign exchange exposure to your portfolio, while also  boosting the nation’s external reserves,” she said.

She described the Sovereign Sukuk as a Sharia-compliant Security that represents interests of the owner in an asset or pool of assets.

“The Sukuk ensures that every financial activity is backed by real economic activity,  and there are specific infrastructural projects linked to the Sukuk investment,” she said.

She said that the FGN Green Bond is a fixed-income security used to finance projects that have positive impact on the environment and to provide solution to climate change.

She added that Treasury Bills were short-term securities issued with tenors of 91 days,  182 days and 365 days.

“The minimum for this investment is N50m, ” she said.

NAN reports that the DMO is currently embarking on awareness drive to educate retail investors across the country on the benefits of investing in the various FGN Securities.

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