Who Can Issue Government Bond (section 222 of the Investment and Securities Act 2007
a.
The Federal Government
b.
Federal Government
Agencies
c.
State Government and their
agencies
d.
The Federal Capital
Territory and its agencies
e.
Local Governments and
f.
Any company which is
wholly owned by the Federal, State, Federal Capital Territory and Local
Government.
If the Federal Government
issues bonds, it is called sovereign
bond. But, if the States, local governments, and government agencies issue
bonds, it is called revenue bonds. In
similar vein, cities within local governments issue municipal bonds.
Law Regulating Government Bonds
·
Trustee Investment Act
·
Debt Management Office (Establishment) Act
·
Investment and Securities Act
·
Securities
and Exchange Commission Rules 2013
Please note that the Debt Management
Office is part of the Federal Ministry of Finance, which oversees issue of
government securities in collaboration with the Securities and Exchange Commission.
READ ALSO: An Introduction to FGN Bonds
Conditions and Requirements for a Valid Issue of Government Bonds
1
There must be a law passed
by the National Assembly, State House of Assembly or Local Government
authorising the issuance of bonds.
2
The bond instrument must
bear the crest of the government body and be signed by the Minister, Commissioner
or Chairman or other appropriate officer of the body raising the loan: section 241(1) of the Investment and Securities
Act.
3
The total amount of
out-standing loan and the bond of the issuer should not exceed more than half of its actual revenue for the preceding
financial year: section 223(1)(a) of the
Investment and Securities Act: Rule 565(2) of the Securities and Exchange Commission Rules
2013.
4
The bond issue must be
registered with the Securities and Exchange Commission: Rule 564 of the Securities and Exchange Commission Rules 2013 and section 224(1) of the Investment and Securities
Act.
5
Redemption date shall not
exceed 25 years from date of
issuance of the bond: section 226(2) of
the Investment and Securities Act.
6
Letter of authority of
guarantee by the Accountant General of State or Federation stating that the
bond shall be paid and to deduct at source from the statutory allocation due to
the issuer in the event of default or failure to meet its payment obligations.
7
A sinking fund is required
to be opened by the Accountant General of the state or federation to deposit
money overtime to make up for the payment of the bonds at the required date: section 224(4) of the Investment and Securities
Act.
8
A separate sinking fund
shall be established for each loan raised: section
251 of the Investment and Securities Act.
9
The bond holders must pay
full purchase price before registration: section
231 of the Investment and Securities Act.
10
Bond Certificates must be
issued to bondholders by the registrar within
2 months of the issue: section 232
of the Investment and Securities Act and Rule 565(5) of the Securities and Exchange Commission Rules 2013.
11
A trustee (usually a
company) is to be appointed to act on behalf of the bondholders: sections 224(5); 245(1) & (2); and 247 of
the Investment and Securities Act.
12
Registered Bonds may be
designated in any denominations approved by Securities and Exchange Commission:
section 241(2) of the Investment and Securities
Act.
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