FGN bonds issued in ‘note format’

The Debt management Office (DMO) says the Federal Government of Nigeria bonds in the international market had been issued in global depository note (GDN) format.

The GDN is a debt instrument created by a depositary bank that evidences ownership of a local currency denominated debt security.

Dr Abraham Nwankwo (pictured), DMO Director General, said in a statement: “On Thursday, July 31, 2014, Nigeria recorded yet another milestone in the International Capital Market (ICM) by issuing Federal Government of Nigeria Bonds (FGN Bonds) in Global Depository Note (GDN) format.

“This issuance of FGN Bonds in GDN format represents the first by any African country.

“It was targeted specifically at foreign investors who would otherwise not invest directly in the Domestic FGN Bond Market.”

According to the statement, the issuance also serves as a precedent for a possible re-opening of the bonds in the ICM at a future date.

It stated that it would also provide a unique mechanism for the target foreign investors to invest in the domestic market on a continuous basis.

The statement added that the issuance of FGN Bonds in GDN format was in line with the DMO’s strategy of diversifying the investor-base for FGN securities.

It said the move was also in tandem with the organisaton’s strategy at encouraging more supply of funds to the domestic market.

This, it stated had added advantage of freeing up space for other domestic borrowers.

“The ability to issue local currency bonds in the ICM represents further affirmation by foreign investors of the fundamentals of the Nigerian economy, government policies and Mr President’s Transformation Agenda,” DMO said.

The statement also stated that the emergence of a robust bond market supported by regular bond auctions had provided the necessary foundation for the emergence of domestic sub-national and corporate bond markets.

This, it stated, would contribute to the growth and development of the domestic capital market.

It would be recalled that FGN Bonds was first issued by DMO on behalf of the Federal Government in 2003.

It was meant to extend the maturity profile of the government’s domestic debt stock and resuscitating the domestic bond market.

Since 2003, DMO, through various strategies, has created a vibrant domestic FGN Bond Market that has received international recognition through the inclusion of selected FGN Bonds in international Bond Indices.

The indices include J.P Morgan’s Government Bond Index in October 2012 and Barclays Capital’s Local Currency Bond Index.