Economy
Reigniting Investors’ Interest in FGN Savings Bond
Investors’ participation in the Federal Government of Nigeria (FGN) Savings Bond has not been impressive since the introduction of the Bond in March 2017 despite the increase in the coupon rate (interest rate) on the Bond.
The amount allotted dropped consistently from N2.07billion in March 2017 to N400.57million in July 2017.
The total number of investors in the FGN Savings Bond also dropped from 2,575 in March 2017 to 779 in July 2017.
The coupon rate on the 2-year Bond which was 13.01% in March 2017 stood at 13.39% in July 2017 while the coupon rate on the 3-year Bond which was 13.79% in April, the first time a 3-year bond was issued, stood at 14.39% in July 2017. There is a need for all the stakeholders in the Bond to reignite investors’ interest in it.
In March 2017, the Debt Management Office (DMO), on behalf of the FGN, introduced the monthly FGN Savings Bond (FGN SB) as part of its efforts to promote the savings culture in Nigeria and improve financial inclusion, particularly amongst retail investors.
The Bond also provides additional funding for the government and helps to broaden the country’s funding base.
It offers guaranteed return in the form of a fixed quarterly interest payment. The minimum investment is N5,000 while the maximum investment is N50million. Investors can subscribe to the Bond through their preferred stockbroking firms on a monthly basis. Some of the important features of the Bond are: income earned on the Bond is exempted from tax payment; it can be traded in the secondary market on the floor of The Nigerian Stock Exchange (NSE); it is backed by the full faith and credit of the FGN; it commands a higher interest rate (coupon rate) than the traditional savings account in banks; the Bond is acceptable as collateral for loans by banks and it serves as good savings towards retirement, wedding, school fees, house projects, etc.
Between March 2017 and July 2017 a total amount of N5.15billion was raised through the FGN Savings Bond. The highest amount allotted so far was N2.07billion in March 2017 while the lowest amount was N400.57million in July 2017.
The coupon rates for the August 2017 offer are 13.535% and 14.535% for the 2-year Bond and 3-year Bond respectively. This means that the August Bond issues carried higher coupon rates than the July issues and represent the highest coupon rates since inception. The persistent increase in the coupon rates has not attracted enough subscription to the Bond despite the steady decrease in the inflation rate in the country since January 2017.
One of the factors we can attribute to this development is the rally that dominated the equity market in Nigeria since the introduction of the Bond in March 2017.
The Nigerian Stock Exchange All Share Index (NSE ASI) appreciated by 51.47% between March 01, 2017 and August 9, 2017. Many retail investors diverted funds to the equity market to take advantage of capital appreciation.
Other factors are: the low awareness of the benefits and characteristics of the Bond; the low liquidity of the Bond at the secondary market and the high yield on the Nigerian Treasury Bill (NTB).
The following strategies can be adopted to increase investors’ participation in the FGN Savings Bonds: The DMO and the Stockbrokers can organize investors’ roadshows in various cities and schools across the country. This will be an avenue to directly engage retail investors on the need for them to hold the Bonds in their investment portfolio.
They can start with a pilot scheme in Lagos, Abuja, Port Harcourt and Kano. The DMO can work with some identified large corporate organizations that have large number of employees to encourage their employees to invest in the Bonds on a monthly basis.
The DMO can also work with government agencies to encourage civil servants to invest in the Bond. We believe these strategies should be able to attract a minimum of 1million subscribers on a monthly basis.
If this is achieved and the monthly subscription amount increases, the overall weighted average interest rate on the FGN debt will drop.
By Dipo Olowookere
About 0.04 per cent was recovered on Friday from the loss recorded by the Nigerian Exchange (NGX) the previous due to profit-taking.
Yesterday, investors were in the market with renewed vigour, mopping up stocks trading at relatively cheaper prices.
According to data, the insurance counter gained 0.41 per cent, the banking sector appreciated by 0.38 per cent, and the consumer goods index grew by 0.14 per cent.
The gains achieved by these three sectors were enough to lift Customs Street at the close of business despite the 0.26 per cent decline printed by the industrial goods segment and the 0.14 per cent loss suffered by the energy industry. The commodity counter was flat during the session.
A total of 43 equities gained weight on the last trading day of this week, while 26 equities shed weight, indicating a positive market breadth index and strong investor sentiment.
Red Star Express increased its share price by 10.00 per cent to N13.20, NCR Nigeria grew by 9.97 per cent to N128.55, SCOA Nigeria inflated by 9.96 per cent to N14.90, Omatek appreciated by 9.94 per cent to N1.77, and Deap Capital expanded by 9.85 per cent to N4.46.
On the flip side, McNichols decreased by 8.81 per cent to N6.00, Legend Internet crumbled by 7.56 per cent to N5.50, Cornerstone Insurance crashed by 6.48 per cent to N6.35, C&I Leasing contracted by 6.29 per cent to N8.20, and Austin Laz slipped by 5.78 per cent to N3.75.
Yesterday, 539.9 million shares valued at N16.7 billion were transacted in 48,023 deals versus the 1.0 billion shares worth N31.6 billion executed in 51,227 deals in the preceding day, implying a shrink in the trading volume, value, and number of deals by 46.01 per cent, 47.15 per cent, and 6.26 per cent apiece.
Zenith Bank was the most active for the day with 54.6 million stocks sold for N3.8 billion, Jaiz Bank traded 41.5 million units worth N359.4 million, Secure Electronic Technology transacted 37.7 million units valued at N39.2 million, Access Holdings exchanged 30.5 million units for N699.2 million, and Lasaco Assurance transacted 27.2 million units worth N68.3 million.
When the market closed for the day, the All-Share Index (ASI) went up by 72.21 points to 166,129.50 points from 166,057.29 points and the market capitalisation gained N31 billion to N106.354 trillion from N106.323 trillion.
By Adedapo Adesanya
It was a positive ending for the Naira this week after it further appreciated against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, January 16 by N1.33 or 0.09 per cent to sell for N1,417.95/$1 compared with the previous day’s N1,419.28/$1.
The domestic currency also gained N2.41 against the Euro in the official market to close at N1,647.51/€1 versus the preceding session’s closing price of N1,649.92/€1, however, it suffered a N7.97 loss against the Pound Sterling in the same market window to trade at N1,901.32/£1, in contrast to Thursday’s closing price of N1,893.35/£1.
In the same vein, the Nigerian Naira depleted against the Dollar at the GTBank FX counter by N2 to quote at N1,427/$1 compared with the previous day’s N1,425/$1, but strengthened against the greenback at the black market yesterday by N5 to settle at N1,485/$1 versus the N1,490/$1 it was exchanged a day earlier.
Improved supply conditions helped keep the market within range as exporters’ and importers’ inflows in addition to non-bank corporate supply enhanced liquidity as the Central Bank of Nigeria (CBN) made no visible intervention.
Stronger external inflows from foreign portfolio investors (FPIs) and improving current account dynamics, continue to align with structural support in the wider economy.
Nigeria has seen projections of a stronger economic or gross domestic product (GDP) growth and lower inflation in 2026, with these forecasts citing improved macroeconomic fundamentals and reform impacts.
As for the cryptocurrency market, it was mixed following selloff in precious metals and lower US stocks appeared to be denting crypto sentiment.
Gold and silver, both of which also enjoyed big rallies earlier this week, tumbled 1.2 per cent and 5 per cent, respectively while key US stock indexes — the Nasdaq, S&P 500 and Dow Jones Industrial Average — all reversed from early gains to modest losses in Friday trade.
Dogecoin (DOGE) shrank by 2.2 per cent to $0.1370, Ripple (XRP) slipped by 0.8 per cent to $2.05, Ethereum (ETH) went down by 0.7 per cent to $3,228.56, and Bitcoin (BTC) slumped by 0.6 per cent to $95,086.80.
Conversely, Litecoin (LTC) appreciated by 3.2 per cent to $74.48, Solana (SOL) rose by 0.4 per cent to $143.70, Cardano (ADA) jumped by 0.2 per cent to $0.3942, and Binance Coin (BNB) increased by 0.1 per cent to $935.88, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
By Adedapo Adesanya
Oil prices settled higher amid lingering worries about a possible US military strike against Iran, a decision that may still occur over the weekend.
Brent crude settled at $64.13 a barrel after going up by 37 cents or 0.58 per cent and the US West Texas Intermediate (WTI) crude finished at $59.44 a barrel after it gained 25 cents or 0.42 per cent.
The US Navy’s aircraft carrier USS Abraham Lincoln was expected to arrive in the Persian Gulf next week after operating in the South China Sea.
Market analysts noted that it doesn’t seem likely anything will happen soon. However, the weekends have become the perfect time for actions so as not offset the markets.
The market had risen after protests flared up in Iran and US President Donald Trump signalled the potential for military strikes, but lost over 4 per cent on Thursday as the American president said Iran’s crackdown on the protesters was easing, allaying concerns of possible military action that could disrupt oil supplies.
Iran produces approximately 3.2 million barrels per day, accounting for roughly 4 per cent of global crude production, so it was not a coincidence that markets rallied sharply through Tuesday and Wednesday as President Trump canceled meetings with Iranian officials and posted that “help is on its way” to Iranian protesters, raising fears of potential US military strikes that sent prices surging toward multi-month highs.
Weighing against those fears are potential supply increases from Venezuela.
The Trump administration is exploring plans to swap heavy Venezuelan crude for US medium sour barrels that can actually go straight into Strategic Petroleum Reserve (SPR) caverns, since not all all oil belongs in the reserve.
According to Reuters, the Department of Energy is considering moving Venezuelan heavy crude into commercial storage at the Louisiana Offshore Oil Port, while US producers deliver medium sour crude into the SPR in exchange.
Analysts expect higher supply this year, potentially creating a ceiling for the geopolitical risk premium on prices.
Some investors covered short positions ahead of the three-day Martin Luther King holiday weekend in the US.
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