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Demand for Federal Government’s bonds drops by 75%

By Michael Eboh
Demand for Federal Government Bonds dropped by 75.38 per cent last week to 73.56 million units valued at N79.84 billion in the Over-the-Counter (OTC) bond market.

Specifically, investors exchanged 73.56 million units of various government bond, valued at N79.84 billion in 363 deals, in contrast to the previous week’s turnover of 298.75 million units valued at N335.7 million in 3,391 deals.
The amount invested in bonds is  however  625.16 per cent higher than the N11.01 billion staked on equities on the floor of the Nigerian Stock Exchange (NSE) in the same period under review.

Investors in the equities segment of the capital market exchanged 1.3 billion shares valued at N11.01 billion in 15,731 deals.

The diversion of investment to the bond market may be as a result of the unattractiveness of the equities’ market, engendered by a massive erosion of investment brought about by consistent decline in share prices.

According to Researchers at Meristrem Securities Limited, the escape to the bond market is parts of strategies by investors to cope with the crisis in the capital market and the financial sector in general.

They said, “Anecdotally, we understand that the flight to bond investment has been crafted as a ‘coping strategy’ which at best could be regarded as a short term measure to sail through the challenging investment climate.

Hence, it would not be unexpected if bond prices retrace their steps any moment as the investment horizon gets clearer.

“It is instructive to note that the performance track record of Nigerian bonds has been strongly influenced by the dominance of sovereign debts which command a material proportion of 95% of outstanding issues. Hence, the bond market appears structurally ring_fenced against the impact of corporate failures as opposed to the vulnerability of the equities market.”

The Sixth Federal Government of Nigeria (FGN) Bond 2012 Series 2 recorded the highest patronage in the sector, accounting for 14.27 per cent of the total turnover, with 10.5 million units valued at N10.83 billion in 28 deals.

Following in the sector’s activity chart was the Sixth FGN Bond 2029 Series 3, accounting for 12.51 per cent of the sector’s total turnover, with  9.2 million units valued at N10.91 billion in 52 deals.

Of the 41 FGN Bonds available, 21 enjoyed the patronage of investors in the week under review, compared to 22 in the preceding week.

Meanwhile, IHS Nigeria Plc announced a 38.52 per cent increase in its profit after tax for its 2009 financial year.
According to its audited results for the year ended, April 30, 2009, its profit after tax rose to N1.05 billion from N758.2 million recorded in 2008.

Its turnover appreciated by 55.98 per cent from N7.27 billion recorded in 2008 to N11.34 billion in the period under review. The company is recommending a dividend of N0.05 per share.


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