Bonds represent a long-term debt obligation of an entity. Investors in bonds, effectively lend funds to the issuer of the bond for a defined period of time to meet their financing needs. Like most loans or lending arrangements, bonds are interest-bearing securities issued at fixed or variable interest rates, and the interest is paid either in the form of a periodic coupon throughout the tenor of the bond or as a discount at the issuance of the bond. By issuing a bond, the issuer (borrower) commits to make both interest and principal payments to the investors (lenders).

Bonds may be issued in domestic/local currency of the issuer or foreign currencies, to meet both short-term and long-term financing needs. They may be issued through various processes such as Competitive Bidding (Auction), Book Building, Syndication or Private Placements.

The Debt Management Office of Nigeria (on behalf of the Federal Government of Nigeria; “FGN”), through the Central Bank of Nigeria, issues Bonds periodically to meet the government’s medium- to long-term funding needs. FGN Bonds are usually issued through a competitive bidding process, following which they are listed and traded on relevant platforms on FMDQ Exchange.
In addition to FGN Bonds, other types of bonds listed and traded/reported on FMDQ Exchange includes:

  • Agency Bonds – Bonds issued by government-owned/sponsored entities
  • Subnational/Municipal Bonds – Bonds issued by state and local governments within a sovereign nation
  • Corporate Bonds – Bonds issued by corporations
  • Supranational Bonds – Bonds issued by supranational entities such as the International Finance Corporation (IFC), the African Development Bank (AfDB), the World Bank Group (World Bank), etc
  • Eurobonds – Bonds issued by any of the issuer types denominated in foreign currencies, other than the domestic currencies of the issuer
  • Sukuk (or “Sharia-compliant” bonds) – Bonds issued in compliance with Islamic law and jurisprudence. Sukuk are interest-free securities, in line with Islamic law prohibiting interest payments. By investing in Sukuk, investors obtain a commensurate share in the profit and risk associated with an asset/project

For more insight on the characteristics and the various types of bonds, kindly click the link below to our Learning Article on Bonds

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