FG to fund over N6trn deficit with bond issuance in Q1’2022 – DMO




The Federal Government has revealed how it it intends to fund its budget deficit this year. Patience Oniha, Debt Management Office (DMO) said, government intend to roll out an FGN Bond in the first quarter of 2022.

FGN Bonds are debt securities (liabilities) of the Federal Government of Nigeria (FGN) issued by the Debt Management Office (DMO) for and on behalf of the Federal Government. The FGN has an obligation to pay the bondholder the principal and agreed interest as and when due.

The 2022 budget has an expenditure plan of N17.127 trillion but FG is expecting only N10.74 trillion, leaving a deficit of N6.39 trillion.

To help cover the deficit, Patience Oniha, DMO director-general has announced how the first tranche of domestic borrowing will take place, as contained in a document released by the DMO on its website.

According to the press release, the issuance for the quarter under review will be held on 19th January, 16th February, and 23rd March 2022 respectively.

The breakdown of the calendar shows that the agency will be issuing a new FGN bond (FGN Jan 2042) with a maturity tenor of 20 years.

the implication is that the FG will be borrowing the money from Nigerians, because When you buy FGN Bonds, you are lending to the FGN for a specified period of time. The FGN Bonds are considered as the safest of all investments in domestic debt market because it is backed by the ‘full faith and credit’ of the Federal Government, and as such it is classified as a risk-free debt instrument.

According to the DMO, the bonds have no default risk, meaning that it is absolutely certain your interest and principal will be paid as and when due. The interest income earned from the securities are tax exempt.

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