What are Bonds?
Bonds are debt instruments that represent a loan made by an investor to a borrower, typically corporate or governmental. Essentially, a bond is a contract between the issuer (borrower) and the bondholder (investor) where the issuer promises to pay back the borrowed amount (principal) along with periodic interest payments over a specified time.
Bonds are one of the most common forms of investment, providing a predictable income stream and helping diversify a portfolio. Unlike stocks, which represent ownership in a company, bonds are a form of debt, and bondholders are creditors of the issuer.
What is a Federal Government Bond?
A Federal Government Bond is a debt security issued by a national government to support government spending and obligations. It is considered one of the safest types of investments because it is backed by the full faith and credit of the government. These bonds are used to finance a range of public projects, from infrastructure development to social programmes, and to manage national debt.
Federal government bonds are considered very low-risk investments because they are backed by the government’s ability to raise taxes and print money to meet its obligations. For this reason, they are often called “risk-free” assets. The risk of default on federal government bonds is generally very low, making them an attractive option for conservative investors seeking capital preservation.
On the 19th of August 2024, the Federal Government of Nigeria initiated a domestic dollar bond offering with a target size of up to USD500 million which closed on the 30th of the same month.
Although subscriptions are closed, for in-depth knowledge of the Federal Government of Nigeria’s Domestic Dollar Bond and future investment purposes, watch this episode of Follow The Money with Ugo Dre brought to you by Nairametrics. You can also tune in every Monday morning from 8-8:30 am on Classic FM 97.3 or stream on Spotify, YouTube, Facebook or LinkedIn to stay abreast with financial news and sharpen your financial literacy.
