Demand for Govt Securities Slide 6%


By Goddy Egene, 07.11.2010 


Secondary trading in the Federal Government Bonds slowed down in the first six months of 2010, indicating a week patronage of gilt-edge securities.


The FG bonds  used  to witness significant increase regularly at the over-the-counter (OTC) market. However, trading data obtained from the Nigerian Stock Exchange (NSE) showed that  in volume terms, second trading in FG bonds fell by 5.8 per cent. But in value terms, it went up by 10 per cent.


Investors traded 8.1 billion units valued at N9.7 trillion in the first half of 2010 compared with 8.6 billion units worth N8.8 trillion in the corresponding period of 2009.  Despite their relatively low yield, investors still prefer FG bond because of safety of investments unlike equities that are highly volatile. 


However, market operators contended that the low demand experienced in the first half of the 2010 may not be unconnected with the realignment of portfolio by some foreign investors triggered by the recent financial crises that hit Greek with threat to spread to other parts of Europe.The Chief Executive Officer of leading broking firm, that deals heavily on bonds, said that many prospective investors held on to their funds when the Greek crisis was raging.


“The bond market is mostly patronised by high net worth individual investors and institutional investors. But many of the investors held on to their funds due to the recent crisis that threatened other parts of Europe. However, the situation is improving especially with the renewed bear run in the Nigerian equities market,” he said.


Perhaps this accounted for the growth recorded last week at the OTC market as investors traded  418.31 million units worth N465.742 billion, up from  315.84 million units valued at N346.493 billion the previous  week.Director-General of Debt Management Office (DMO), Dr. Abraham Nwankwo, recently said that  the agency would continue to enlighten investors on the benefits of bonds issuance and investment.


“One of the fulcrums of the DMO’s debt market development strategy is the enlargement of the investor base for bonds. This is because we believe that a large and well diversified investor base will support the success of bond issues at the primary market, while providing liquidity through active trading in the secondary market,” he said.


According to the him,  DMO and other stakeholders have embarked on bond enlightenment campaigns through workshops, seminars and adverts to increase investors’ awareness of bonds. He said that one of the key components of the DMO’s current bond enlightenment campaign is to reach the retail investors who are either unaware of the investment opportunities available in FGN bonds, or are unable to invest due to the small size of their investible funds.”




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