Exchange admits N1.2 trillion government bonds in six months
Pursues diversified options for investors
The Nigerian Stock Exchange (NSE) has admitted about N1.21 trillion worth of Federal Government’s new supplementary issuances in its daily official list in the first six month of 2018.
The new issuances, which was contained in the NSE X-Compliance Report as at June 22, 2018, comprising FGN Savings Bond; Supplementary listing/reopening at 14.50 per cent of the FGN March 2018 to July 2021; and matured 10.70 per cent FGN May 2018, among others.
Analysts said that the issuance of bonds, no doubt, will bring both local and foreign investors into the market and will step up government’s efforts to raise the funds needed for infrastructure development, among other projects.
According to them, with government’s economic reforms, prospects were high for the sustained development of the Nigerian bond market, as a tool for deepening the domestic capital market.
For instance, analysts at Afrinvest Limited noted that the performance of the bond market has been shaped by recent happenings in the domestic and global market space.
“On the global front, the key factors are the recent rate hike by the U.S. Fed for the second time this year, to a range of 1.75 to two per cent, which has further strengthened the dollar and stoked capital flow reversal from emerging markets.
“On the domestic front, the current Federal Government’s debt strategy, which is tilted towards reducing the proportion of domestic borrowings in favor of foreign debt sources, as well as falling headline inflation, has shaped investors’ decisions,” they noted.
Specifically, the nation’s bourse listed a total amount of N1.23 billion FGN Savings Bond as at June 22, 2018, with a total of N415.91 billion of supplementary listing/reopening for different coupon and year and a total of N200.33 billion new listing, which comprises the Sukuk Bond, while a total of N300 billion for the matured 10.7 per cent FGN May 2018 were also listed on NSE.
FGN bonds are debt securities of the Federal Government of Nigeria (FGN) issued by the Debt Management Office (DMO) for and on behalf of the sovereign state, with an obligation to pay the bondholder the principal and agreed interest as and when due.
The FGN Bonds are considered as the safest of all investments in domestic debt market because it is backed by the “full faith and credit” of the Federal Government and as such, classified as a risk free debt instrument.
It has no default risk, meaning that it is absolutely certain that investors’ interest and principal will be paid as and when due, even as the interest income earned from the securities is tax exempt.
The Director-General of the Debt Management Office (DMO), Ms. Patience Oniha, recently said government would be listing some of the securities that were issued in the international capital market, adding that government recognised the role of the capital market in developing the economy.
Oniha affirmed that government accessed the international capital markets four times in 2017, and amid uncertainty about the perception of Nigeria, was well met by investors with overwhelming success in each offering.
She stated that funding the budget deficit and refinancing the inherited debt portfolio have been the key drivers behind the capital raising plans and will lead to significant benefits, particularly a reduction in cost of funds, noting that the Diaspora bond provided an opportunity for Nigerians overseas to contribute to the development of the nation.
She said that funds raised would be applied towards developing key infrastructure, with proceeds to be used for budgeted capital expenditure, as well as support the drive towards economic diversification.
The President of the Council of NSE, Abimbola Ogunbanjo, said: “We collaborated with the FGN through the DMO to launch the FGN Savings Bond. It is aimed at boosting the savings culture among retail investors.
“In December 2017, the DMO issued the maiden FGN Green Bond, which is also the first to be issued by an African sovereign. We expect the listing of the FGN’s Green Bond in 2018, which could open the door for more climate bond listings.
“We continue to enhance our value proposition to the capital market vis-à-vis our mutual fund distribution platform, which we are developing in partnership with several market stakeholders.
The Chief Executive Officer of NSE, Oscar Onyema, said the Federal Government is the largest issuer of bonds on the Exchange in the fixed income space, noting that the NSE has worked with the DMO to introduce other types of bonds.
He added: “We would be coming up with other types of products that will give the investors a good menu of options in terms of how to diversify portfolio.”
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