The Nigerian Stock Exchange (NSE) has listed a total of N856.48 million Federal Government of Nigeria (FGN) Savings Bond on the floor of the Exchange as at June 8, 2018.
The NSE on January 8, 2018 listed N196.17 million each of 12.738 per cent and 11.738 per cent FGN Saving Bond December 2020, and 2019 respectively. Also in March 2018, NSE listed N235.02 million, N32.82 million, N123.25 million and N73.1 million.
The Debt Management Office (DMO) of Nigeria, on behalf of the Federal Government of Nigeria in 2017 launched a new retail investment programme, the FGN Savings Bond to help enhance the savings culture among Nigerians while providing all citizens irrespective of income level, an opportunity to contribute to National Development; as well as the comparatively favourable returns available in the capital market.
FGN Savings Bond is safe and backed by the full faith and credit of the Federal Government of Nigeria, with quarterly coupon payments to bondholders. The bond has a minimum subscription of N5, 000 with additions in multiple of N1,000 with a maximum of N50 million.
Fixed coupon would be paid quarterly to investors and the bond tenors range from two to three years’ tenor. The couple rate for the two – year FGN Savings Bond is 10.344 per cent, while the three – year FGN Savings Bond stood at 11.344 per cent and the offer is being issued on a monthly basis through an offer for subscription and with a period of five days from the date of announcement.
However, investors’ participation in the FGN Savings Bond has been on a decline since its introduction in March 2017.
Stocks market analysts said that FGN Savings Bonds are considered passive investment strategy to ensure capital preservation with low risk, saying that most investors on the NSE simply buy equities but these have very high risk profile.
They added that “in the current bearish financial environment, to improve annual real return and risk profile on investment, we strongly recommend reallocation and reinvestment of part of client’s equities into saving bonds.”
Managing director/chief executive officer of APT Securities and Funds Limited, Mallam Kurfi Garuba , said that bond was another alternative source of income to equities, explaining that when the equities market was not doing well, investors move to bond market and vice-versa. He pointed out that many retail investors’ diverted funds to the equity market to take advantage of capital appreciation.
Garuba further noted that the coupon on the savings bond were less attractive than prevailing fixed income securities, and had been cut on a month-on-month basis in the last four months, which coincided with a strong rally in the equity market.
Chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion, stated that there was huge potential for the savings bond, calling on DMO and other fiscal and monetary authorities to deepen awareness and investor education on the products.
Also, the managing director of Cowry Asset Management Limited, Johnson Chukwu, pointed out that the future prospect of the savings bond was tied to improvement in the nation’s macro-economic conditions, especially as it concerns low income earners.