Smart Money Moves – Savings Bond

The FGN savings bond is a retail product accessible to all income groups. The bond aims to promote a national savings culture, this is laudable given the precarious position most Nigerians found themselves following the economic downturn which began in mid-2014. Apart from assisting with expanding pockets, the savings bond provides an opportunity to Nigerian nationals irrespective of income level to participate in and benefit from the favourable returns available in the capital market.

Basically, interest income is paid directly to the bond holder’s account. The annualised yields could range between 13% – 14% with income interest paid on a quarterly basis. At least your money would earn extra income suitable for expenses on school fees, housing projects (rent payment inclusive) as well as event preparation like weddings. The list goes on.

It is worth noting that income earned on this bond is exempted from tax payment and it offers a higher interest rate (yield) than the traditional savings account obtainable in banks. Additionally, it is acceptable as collateral for loans by banks – a benefit for small or medium-sized businesses.

The investment culture in Nigeria is abysmal and as such a conscious effort should be made to avoid debt drowning in future. That said, students in tertiary institutions should also consider remoulding their mind-set by engaging in this savings bonds (at least one investment injection each academic year).

To tap into this investment instrument, a minimum of N5, 000 is required and additional increases in multiples of N1, 000 is permissible. However, the limit per bond holder is N50m. Regarding subscription method,  prospective investors can only subscribe  through stockbroking firms that trade  on  the  floor  of  The  Nigerian Stock Exchange  (NSE)  and  accredited  by  the  DMO.

Since the launch of the savings bond in March, over 7,000 investors have subscribed. It has indeed provided a vehicle for mobilising savings amongst retail investors.

On a macro note, the savings bond provides additional funding for the government and helps to broaden the country’s funding base as such bond holders are contributing to national development.

Chinwe Egwim
Chinwe Egwim

Public Finance Expert, Macro Economist & Fixed Income Analyst at FBN Capital

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