Nigerian Bond Market to See New Burst of Issues
17 October, 2007
Indications are strong that the bond market is on the verge of heightened fresh issue activities. The Debt Management Office and the Minister of Environment, Housing and Urban Development have just made pronouncements pointing to plans for bond issues to provide funding for various objectives. At a different level, the Finance Minister had recently been reported to have hinted on the possibility of Eurobond issue to fund the huge infrastructural investment needed to revitalise the Nigerian economy.
Even as the year heads into its closing phase, the Debt Management Office (DMO) looks poised to issue new bonds within the quarter to fund the budget deficit and restructure domestic debt. The DMO announced Tuesday that it plans to raise N82.81 billion - some $664 million - from the Q4 bond issue. This is actually in tune with its 2007 quarterly bond issuance programme for the 4th FGN Bond. The programme scheduled issues of N110 billion for Q1 to Q3 and N116 billion for Q4.
In the same vein, the Environment, Housing and Urban Development Minister, Halima Alao, announced, while addressing the Emerging Urban Africa conference in Abuja, Wednesday, that the Federal Government will be working to raise N100 billion through mortgage-backed bond issue to fund housing development. The government calculates the housing deficit to be in the region of 17 million.
More bond issues, besides raising money for the Government, stand to give further boost to the bond market which is yet to gain prominence among the populace. Just as stock investing has benefited hugely from the series of public issues that have come to the market over the last three years, the bond market will do with activities that can ignite interest in bonds. For now, bonds remain largely the preserve of institutional investors. Yet individual investors can include bonds in their portfolios, for good benefit.
The bond market is also not proving attractive to companies that want to raise fresh capital. While the stock market has been a beehive of primary issues in the last three years, no company looks ready to give the bond market a look-in. Granted that banks and insurance companies needed to raise equity capital to meet regulatory requirements, several other equity issues have followed suit, even from the productive sector. The result: only Federal Government bonds currently come to the bond market, leaving potential investors very limited choice.
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