The FGN Savings Bond was introduced into the market March 7, 2017 as a result of market restructuring. This saw the upward review of the minimum subscription for treasury bills and bonds in the primary market from N10,000 to N50Millon. This means investors having difficulty coming up with the minimum subscription of N50Million can only buy from the secondary market or subscribe to FGN Savings bonds. FGN savings bonds have a much lower minimum subscription requirement of N5,000 only.
Before I proceed further, I want to make further clarifications regarding some terms based on questions and feedback I have received so far. The primary market is where you buy directly from the issuer. It is like buying drinks directly from the manufacturer (wholesale). You do that by going through your bank, stockbroker, or discount house. The secondary market is where you buy from someone who bought from the primary market and wants to re-sell (retail). It is like going to a supermarket to buy drinks – you are buying from someone who bought from the manufacturer.
Brokers usually deal with both the primary market and secondary market transactions. That means you do not have to look for another broker when you want to trade in the secondary market unless you have reasons to. For example, the broker also has a minimum amount they sell to the public based on who their target clients are. It is possible that the minimum amount the broker is ready to accept is too high for you. In that case, you need to look for another broker that will accept the amount you have. If you still cannot find one, then you may have to save up until your money is enough. There are investment products you can use to save monthly until you arrive at the amount you want.
How to invest in FGN Savings Bond
To start investing in FGN Savings bonds, simply visit a stockbroking firm accredited by the Debt Management Office (DMO). The DMO is responsible for issuing bonds on behalf of the Federal Government. Filling the required forms is not difficult. You can download the current list of accredited stockbroking firms by visiting the DMO website www.dmo.gov.ng.
You will be required to fill out account opening forms by the stockbroker, to enable you to deal through them. Visit a stockbroker Whether you end up opening the account or not. You will become better informed than someone sitting at home asking questions but doing nothing. Taking that first step seems to be the biggest challenge most people have.
FGN Savings bond is virtually risk-free
Investing in fixed-income securities is virtually risk-free, so there is no point in analyzing endlessly an investment that carries no risk. It does not make sense. What should concern you is how to enter, how to exit, and how investing in bonds fits into your financial goals and plan. You must have a reason for wanting to invest in bonds. Once you are clear, just step forward and take action. Any additional questions you may have will be answered by the broker.
FGN Savings bond is issued by the DMO on behalf of the Federal Government of Nigeria, targeted at low-income earners. This is to encourage a savings culture and earn income (interest) at competitive rates. The interest earned on FGN Savings bond is tax-free. This means you can grow your money faster.
Features of FGN Savings bond
Interest earned from FGN Savings bond is paid quarterly, i.e. every 3 months into your account as indicated in the submitted subscription form. The interest is calculated per annum (year). This means if you invest N100,000 in FGN Savings bond at 13%, you will be paid N13,000 per year. Hence every 3 months, you will get a credit alert of N3,250 which adds up to N13,000 per year. To earn more interest, increase your savings and save consistently.
The minimum subscription for FGN Savings bond is N5,000 up to a maximum of N50Million. You will be advised by the broker what their minimum subscription is. If you cannot afford using the broker, find another broker.
Tenor of FGN Savings bond is 2 to 3 years. Interest rate is determined by the issuer (FGN) and is usually stated in the offer for subscription adverts. Offer for subscription is open to the public and it takes place every month, lasting about a week. You will be notified by your stockbroker if your subscription was successful.
Grow your money
You can choose to participate in every offer for the subscription or accumulate your savings and subscribe once in a while. It is important that you are working towards a goal and have a plan so that you remain focused.
For your money to grow faster, save your interest rather than spend it. add it to your savings and move it into another investment. Don’t look down at the amount because it adds up over time. You can keep growing your interest to the level that it becomes another source of income. It gives you something to fall back on in the future in the event if lose your job or your pension income is not enough.
If you are interested in investing in FGN Savings bond, the most important step you need to take is to have a financial goal. Visit a stockbroker to start the process. You will understand better as you go along.
