Why should I buy Federal Government Bonds?

Federal Government Bonds are the safest securities any investor can buy in Nigeria. They are considered safe because the borrower is the FG and payment is fully guaranteed compared to other types of security or investments where there could be threat of default.

How can a retail investor invest in FG Bonds?

The first step is to open a CSCS account. The CSCS is the central depository for all securities in Nigeria.

After this, the investor then pays money to be invested into a bank account held by a custodian. Once payment is confirmed, the investor gives his instruction to his bond trader to execute the trade; the custodian can also be instructed to do this on the investor’s behalf.

The bonds to be purchased are then bought into the investor’s CSCS account and he/she is notified of the purchase.

When selling the bonds, the same process will be followed i.e. the investor notifies the bond trader of the intention to sell, the trader sells the bond and net proceeds from the sale is credited to the investor’s bank account by the custodian.

If the investor wishes to hold the bond until it matures, he/she will be collecting interest two times a year from the FG. The amount of interest to be earned will depend on the interest rate on each bond and the volume of bonds purchased by the investor.

For example, if an investor buys N1,000,000.00 worth of FG bonds and that particular bond pays interest at 16% per annum. The investor will be entitled to two payments of N80,000.00 every 6 months (i.e. N1,000,000.00 multiplied by 16.00% = N160,000.00 per annum) until that bond is settled when the investor will be repaid the N1,000,000.00 principal amount invested.


Tola ODUKOYA
Head, Research
Dunn Loren Merrifield
Elephant House | 214 Broad Street | Lagos
Tel. 234 1 462 2683-4 | Mob. 234 802 310 2453
email: todukoya@dunnlorenmerrifield.com