FGN Bonds Market Records N16.9trn In 2017, Up 22.20%

Sonnie Ayere

The contribution of the Federal Government Bonds (FG Bonds) market to the Nigerian economy in 2017 has been described as remarkable just as the total value of trading in the market rose by 22.20 per cent to N16.877 trillion in 2017 from N13.811 trillion achieved in the corresponding period in 2016.

FGN Bonds are debt instruments or contracts issued by the Federal Government of Nigeria for an agreed period of time.

The investor lends an amount of money to the government and earns interest on the investment until the maturity of the bond when the initial payments will be returned.

Sonnie Ayere, the President of the Association of Issuing Houses of Nigeria (AIHN), while speaking at the association’s yearly general meeting held in Lagos, explained that that the FGN bonds dominated primary bond market activities in 2017 following the introduction of the FGN Savings Bond, Sovereign Sukuk and Green Bonds  into the domestic market.

Also, numbers of deals within the same period grew from N50,427 to 63,031, representing an increase of 24.99 per cent.

According to him, the bond market capitalisation increased to N9.29 trillion as at December 31,2017 from N6.93 trillion recorded in the previous year.

“The new bonds: FGN Savings Bond, Sovereign Sukuk and Green Bonds are valued at N7.2 billion, N100.00 billion and N10.69 billion, respectively. The DMO redeemed a total of N198.032 billion worth of Nigeria Treasury Bills (NTBs) in December 2017, with $500 million, out of the $3.0 billion Eurobond issued in November 2017.

“In the corporate bond market, there was a decline in activity in 2017 relative to 2016. Corporate bonds issuance for 2017 stood at N23.15 billion by three companies: Dufil Prima Foods Plc, Viathan Funding Plc and LAPO Micro Finance Bank SPV Plc , compared to N108.04 billion issued by nine corporates in 2016, representing a decrease of 78.57 per cent. The decline in the issuance by corporates was attributed to the high borrowing cost prevalent in the domestic capital market in 2017.”

On the association’s achievement during the year under review, Ayere said the association push for enhanced liquidity to finance business operations for investment banking firms has yielded a reasonable result as the CBN has accepted to allow Capital Market Operators (CMOs) to purchase government bonds and CBN securities directly from the apex bank.

“We were involved in a number of capital markets and capacity building programmes with the Securities and Exchange Commission (SEC), one of such activities was a roundtable aimed at having a responsive commission and a more efficient capital market.

“The Association also threw its weight behind the proposal by the National Assembly Joint Committee on capital market and institutions for the demutualization of the NSE, all things being equal, we expect this to materialize next year.”

Reviewing its performance, the president explained that the association sustained its growth trajectory, as total income grew by 19.9 per cent to N52.91 million, higher than N44.12 million posted in the previous year.

The sum of N22.15 million was realised from members’ subscription during the period under review compared to N19.65 million posted in 2016.

Furthermore, the association’s total expenses dropped to N19.18 million from N20.56 million in 2016.

Also speaking at the meeting, the newly elected president of the association, Chuka Eseka assured that the association under his tenure would witness a seamless continuity that would transform the fortunes of the association.

He added that the constitution of the associations would be reviewed to ensure that the content is in line with the present reality.