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Facts and Background of FGN Bonds	Results of Past Auctions	FGN Bonds Time Table

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Facts and Background of Federal Government of Nigeria (FGN) Bonds

The Nigeria Bonds market officially commenced in 1946 with the issue of the Nigerian Government registered stocks. This evolved into the Federal Republic of Nigeria Development Loan Stock (a.k.a. FRNDS) in 1963. Issues were suspended in 1987 but rejuvenated in 2003 with the 1st FGN Bonds series. We are currently on the 3rd FGN Bond series.

The Debt Management Office (DMO) was set-up in October 2000 while the Act establishing it came into force in June 2003. The Federal Government of Nigeria set up the Debt Management Office (DMO) with the mandate to restructure both external and internal debt in order to minimize the cost of financing its projects and maximize returns within an acceptable risk profile.

In terms of domestic debt, the objective for the DMO is to ease up repayment obligation and budgetary pressure on the Federal Government, by restructuring funding of: local debts (owed to contractors as well as pension liabilities); infrastructural projects; and fiscal deficit from short-term (1 year or less) using Treasury Bills, to long-term (over 2 years) using FGN Bonds.

Other reasons adduced for the introduction of FGN Bonds include:

1. To provide benchmark instruments that would lead to private sector issuance of longer term instruments

2.To encourage long-term savings

3.To assist in the development and reform of the pension fund sector.

The first FGN Bonds was issued in October 2003 (see total issued from inception).

Benefits to the FGN Bond Holder:

1. Tax free Income: interest received on FGN Bonds is not subject to withholding tax, company income tax, etc.
2. High and stable returns
3. Free from default risk: repayment is guaranteed at the maturity of the FGN Bond
4. Collateral for borrowing: the FGN Bond can be used as collateral to raise financing.
5. Easily Tradable as it has a unique quality of being quoted on the Nigerian Stock Exchange and can also be traded over the counter (OTC)

Results of past Auctions

Date of Issue	Tranche	Series	Amount(NBillon)	Subscrittion (N Billon)	Coupon	Amount Sold (N Billon)
1st FGN BOND
Oct-03	3yrs - 2006	1	30	55.7	17.75%	55.7
Oct-03	5yrs - 2008	2	40	12.3	18.25%	12.3
Oct-03	7yrs - 2010	3	40	3.9	T/Bill + 3%	3.9
Oct-03	10yrs - 2013	4	40	0.6	T/Bill + 3.75%	0.6
2nd FGN BOND
Jul- 05	3yrs - 2008	1	20	69.92	11.5%	20.53
Aug - 05	2yrs - 2007	2	20	64.49	8.25%	20.81
Sep - 05	3yrs - 2008	3	20	58.28	8.50%	29.31
Sep - 05	2yrs - 2007	4	20	34.46	8.00%	23.06
Oct - 05	3yrs - 2008	5	20	12.06	12.50%	11.06
Nov - 05	2-yrs - 2007	6	20	17.61	15.00%	17.61
Dec - 05	3yrs - 2008	7	20	69.42	17.00%	55.88
3rd FGN BOND
Jan - 06	3yrs - 2009	1	25	73.15	15.00%	36.7
Feb - 06	3yrs - 2009	2	10	29.45	12.50%	12.61
Feb - 06	5yrs - 2011	3	20	45.59	14.45%	23.48
Mar - 06	3yrs - 2009	4	10	15.78	12.50%	8.16
Mar - 06	5yrs - 2008	5	20	13.39	14.50%	8.09
Apr - 06	3yrs - 2009	6	10	34.34	12.00%	15.41
Apr - 06	5yrs - 2011	7	20	43.85	13.50%	26.91
May - 06	5yrs - 2011	8	10	33.69	12.00%	12.51
May - 06	7yrs - 2013	9	10	16.58	15.00%	10.36
Jun - 06	7yrs - 2013	10	20	26.94	16.00%	21.89
Jul - 06	3yrs - 2009	11	20	45.85	12.50%	20.01
Aug - 06	3yrs - 2009	12	20	59.4	12.00%	29.3
Sept - 06	5yrs - 2011	13	20	64.4	12.99%	26.86
Oct - 06	7yrs - 2013	14	10	41.50	12.74%	10.0
Total			465	837.02		513.03

Mr Amangbo is an Executive Director in the Bank. He graduated with a B.Eng. in Electrical/Electronics from University of Benin in 1988 and holds an MBA. He worked in PricewaterHouseCoopers, before moving over to Zenith Bank Plc in 1993.

He has over 16years postgraduate experience out of which he spent 12years in the banking industry and 4years experience in PricewaterHouseCoopers.

Frequestly Asked Questions on FGN Bonds

Q. What is a bond?

A. A bond is a contract between a lender and a borrower, whereby the borrower agrees to pay the lender interest and repay principal at stipulated periods. It's similar to an IOU, issued by the Government or an institution as a way of raising funds for particular projects. Bonds have a minimum tenor of over a year.

Q. Who are the issuers of bonds?

A. Bonds can be issued by either a Government (Federal, State or Local government) or a Corporate Entity. These are the borrowers to the bond issues.

Q. Who are the investors in bonds?

A. Anyone can invest in a bond. They can be individuals or corporate bodies. They are the lenders to the issuer.(Bondholders)

Q. What is a coupon?

A. Coupon represents the interest payment that the investor in a bond receives as interest payment for investing in a bond. It's normally paid semi-annually, but can be paid monthly, quarterly or annually.

Q. What types of bonds are there?

A. There are various types of bonds depending on the following:
a. Issuers
b. Mode of Coupon Payment
c. Redemption Features
d. Sovereignty.

Q. Do I pay tax on my coupon payment?

A. Coupon payment is Tax Free in Nigeria.

Q. What is a bond's maturity date?

A. This is the date when the issuer of the bond will repay the investor the principal amount borrowed and the final interest payment.

Q. What is the term to maturity of a bond?

A. This is the number of years remaining for an already issued bond to mature

Q. What is an indenture?

A. This is a document containing the terms and conditions binding both parties (Issuer and Investor) to a bond issue.

Q. Who is a trustee?

A. They are appointed to represent the interest of the bondholders, to ensure that the promises of the issuer in the indenture are fulfilled.

Q. What are affirmative covenants?

A. These are activities that the issuer promises to do, e.g. pay coupon and principal timely.

Q. What are negative covenants?

A. These are restrictions on the issuer's activities, e.g. the inability to incur additional debt while bond has not been redeemed.

Q. What are option free bonds?

A. Option free bonds are bonds that do not have any special features in the indenture, allowing the issuer recall the bonds early or the investor to return the bonds before maturity.

Q.What are embedded bonds?

A. These are bonds that have special features embedded in their indenture, which gives the issuer or investor the right to take certain actions against the other party.

Q.Is it possible to buy bonds in-between coupon date? ?

A. Bonds can be purchased between coupon periods, as long as the accrued interest is paid to the seller of the bonds. This accrued interest is known as the Dirty Price of the bonds.

Q. Who gets the coupon for a bond sold in-between coupon dates?

A. The coupon goes to the holder of the bonds on the register closure date.

Q. What is the impact of a bond's yield's on bond prices?

A. bonds prices and yields have an inverse relationship. the higher the price the lower the yield and vice versa.

Q. What are the factors that can affect the price of a bond?

A. The price of a bond is affected by the yield in the market. Yields are affected by interest rates, which in turn are affected by various economic factors like, inflation, government's lending rate, exchange rate, government polices, political stability and other macro economic variables.

Q. What factors can affect the bond market?

A.
a. The credit status of the issuer
b. The forces of demand & supply of such securities
c. The inflation and interest rate movements
d. Activities and performances of the equities market.

Q. What are the benefits of holding bonds in my portfolio?

A. Bonds are otherwise known as fixed income securities. It's ensures that the investor has guaranteed returns on its investment for a definite period of time. It also assists investors and fund managers in diversifying their portfolio.

Q. How do I invest in the FGN Bonds?

A. At the primary auction where the bonds are freshly issued, you can bid through any of the 20 appointed primary dealers/market makers(PD/MMs).Zenith Bank is an appointed primary dealer.

Q. Upon purchase of the bond, how long can I wait before I can convert it to cash?

A. You can convert it to cash immediately by calling on any appointed primary dealer/market maker who are mandated to give two-way price(Bid & Offer) in all FGN Bonds.

Q. Is the interest payment on Bond accrued on yearly basis or twice a year?

A. All FGN Bonds pay coupon (interest) semi-annually i.e. twice a year.

Q. How do I receive my interest payments and interest at maturity?

A. Interest and principal amounts will be credited to the holder's bank account.

Zenith Capital Markets Indicative Bond Yield As @ 29^th July, 2010
	ISSUE DATE	MATURITY DATE	ISSUE TENOR (YRS)	TERM TO MATURITY (Yrs)	% COUPON	Price		Yield
	ISSUE DATE	MATURITY DATE	ISSUE TENOR (YRS)	TERM TO MATURITY (Yrs)	% COUPON	Bid %	Offer %	Bid %	Offer %
4th FGN BOND SERIES 2	23-Feb-07	23-Feb-12	5	1.57	9.50	108.95	109.10	3.54%	3.45%
4th FGN BOND SERIES 3	30-Mar-07	30-Mar-14	7	3.67	10.75	115.20	115.50	6.05%	5.97%
4th FGN BOND SERIES 5	25-May-07	25-May-12	5	1.82	9.23	104.85	105.00	6.35%	6.26%
4th FGN BOND SERIES 6	29-Jun-07	29-Jun-14	7	3.92	9.20	110.25	110.55	6.20%	6.12%
4th FGN BOND SERIES 9	31-Aug-07	31-Aug-17	10	7.09	9.35	110.55	110.85	7.41%	7.35%
4th FGN BOND SERIES 10	31-Aug-07	31-Aug-12	5	2.09	9.50	105.45	105.60	6.64%	6.57%
4th FGN BOND SERIES 11	28-Sep-07	27-Sep-14	7	4.17	9.25	115.30	115.60	5.11%	5.04%
5TH FGN BOND SERIES 1	25-Jan-08	25-Jan-13	5	2.49	9.45	104.45	104.60	7.44%	7.38%
5TH FGN BOND SERIES 2	30-May-08	30-May-18	10	7.84	10.70	125.70	126.00	6.46%	6.42%
5TH FGN BOND SERIES 3	25-Jul-08	25-Jul-11	5	3.34	10.50	107.30	107.60	7.95%	7.85%
5TH FGN BOND SERIES 4	28-Nov-08	28-Nov-13	20	18.34	15.00	165.40	165.70	8.09%	8.07%
5TH FGN BOND SERIES 5	28-Nov-08	28-Nov-13	3	1.51	9.92	105.95	106.10	5.70%	5.60%
6TH FGN BOND SERIES 1	30-Jan-09	30-Jan-12	3	1.81	10.50	105.95	106.10	6.92%	6.84%
6TH FGN BOND SERIES 2	22-May-09	22-May-12	20	18.81	12.49	131.40	131.70	8.99%	8.97%
6TH FGN BOND SERIES 3	22-May-09	22-May-29	10	9.24	7.00	94.50	94.80	7.85%	7.80%
6TH FGN BOND SERIES 4	23-Oct-09	23-Oct-19	20	19.31	8.50	95.75	96.05	8.96%	8.93%
6TH FGN BOND SERIES 5	20-Nov-09	20-Nov-29	3	2.56	5.50	95.50	95.65	7.47%	7.40%
7TH FGN BOND SERIES 1	19-Feb-10	19-Nov-13	5	4.73	5.50	82.00	82.30	8.74%	8.65%
7TH FGN BOND SERIES 2	23-Apr-10	23-Apr-15	20	19.98	10.00	100.10	100.40	9.99%	9.95%

FGN Bonds Time Table

Debt Management Office (DMO) Auction Time Table:

The Federal Government through the Debt Management Office will float a series of three (3) Bonds in the third quarter of 2006. The table for the auctions is shown below:

Month	Tranches	Tenor	Opening	Closing
July, 2006	N20Million 3rd FGN Bonds 2009 Series 11	3 years	24th July 2006	26th July 2006
August, 2006	N20Million 3rd FGN Bonds 2009 Series 12	3 years	21st Aug. 2006	23rd Aug. 2006
Sept,2006	N20 Million 3rd FGN Bonds 2011 Series 13	5 years	25th Sept. 2006	27th Sept. 2006
Oct,2006	N10Billion 3rd FGN Bonds 2013 Series 14	7 years	23rd Oct. 2006	25th Oct. 2006
Nov, 2006	N10Billion 3rd FGN Bonds 2013 Series 15	7 years	20th Nov. 2006	22nd Nov. 2006
Dec, 2006	N10MBillion 3rd FGN Bonds 2016 Series 16	7 years	25th Dec. 2006	27th Dec. 2006

Pamela Yough is a General Manager with the Bank in charge of Multilateral, Conglomerate and Private Banking (MCP Group) and also Group Head, Treasury/Correspondent Banking. She holds a Bachelors Degree in Business Administration from Pace University, New York (1984) and an MBA in International Business from Long Island University, New York (1986).

She joined Zenith Bank in 1999 from Citizens Bank and prior to that was in International Merchant Bank, where she started her banking career. She has over 17 years of banking experience.

Mr. Emmanuel is a General Manager and Group Head of Income Optimisation, Financial Control & Strategic Planning Department. He holds a Bachelors degree in Accounting from the University of Lagos in 1988. He brings into the Management team many years of quality experience from PricewaterHouseCoopers and Diamond Bank Limited before moving over to Zenith Bank Plc in 1996.

He has over 16 years post graduate experience out of which he has 10 years of banking industry experience in addition to 6 years experience in PricewaterHouseCoopers.

For further enquires, please contact:


Dealing Lines		234-1-2783271-4
Reuters Code		ZCAP

Name		E-mail Address
Nnamdi Nwizu		nnamdi.nwizu@zenithcapitalmarkets.com
Tosin Osunkoya		oluwatosin.osunkoya@zenithcapitalmarkets.com
Olawunmi Taiwo		olawunmi.taiwo@zenithcapitalmarkets.com
	*bondtrading@zenithcapitalmarkets.com*

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