Following the inclusion of the FGN bonds in JP Morgan’s emerging market Government Bond Index, new investment in the Nigerian bond market may reach of $1.5 billion (N238.5 billion) by mid 2013, experts at Oxford Business Group (OBG) has said.
The new investment, they said, would be further boosted after the UK-based Barclays Bank adds the Nigerian paper to its local-currency government bond index later this month.
In October 2012, Nigeria was included for the first time on JP Morgan’s emerging market Government Bond Index, considerably raising the profile and accessibility of Nigerian debt issues.
OBG added that hunger for emerging-market issues has pushed down yields, helping lower the cost of investment in Nigeria; Africa’s second largest economy. They noted that the hunger for the FGN Bonds was further driven after a major debt issue by a World Bank organisation, the International Finance Corporation (IFC).
“The first bond offer by a non-resident issuer in Nigeria proved a stellar success at its launch, as the IFC increased the size of its float by 50 per cent due to high demand. The February 6 offer by the IFC, the World Bank’s investment arm, was raised to N12 billion ($75.68 million) from an initial N8 billion ($50.45 million) after orders totalling N20 billion ($126.13 million) had been received. The five-year bonds carried a coupon of 10.2 per cent, which is low for Nigeria but high in general due to naira volatility and larger perceptions of instability and risk due to oil price fluctuations,” OBG said.
In January this year, the IFC announced it would be floating $50 million in naira-denominated five-year bonds in a move to boost Nigerian capital markets and finance the organisation’s local operations. The IFC, THISDAY finding revealed, has a portfolio worth $1.1 billion in Nigeria; its largest in Africa and eighth-largest worldwide.
The Vice-President and Treasurer of the IFC, Jingdong Hua, had during a visit to the Nigerian Stock Exchange (NSE), said the Nigerian market was gathering pace and was attracting the interest of a range of international investors. He said the IFC issue gave foreign buyers the opportunity to access the Nigerian market, while giving them the reassurance of doing so through an international institution.
Hua said the IFC notes would help boost the Nigerian bond market through lowering transaction costs and would also encourage domestic companies to link to fixed-income investors to raise capital.