By Peter Egwuatu
Afrinvest West Africa has advocated for a functional bond market to act as catalyst for the countryâ€™s economic development given its quest to join the league of 20 leading economies in the world by the year 2020.
The company stated that theÂ recent period of economic growth witnessed in county can only be sustained with continuous investment in infrastructure and the expansion of industrial output.
Speaking at the launch of its repackaged â€œ Nigeria International Debt Fund (NIDF) in Abuja recently, Managing Director, Afrinvest Limited, Mr. Ike Chioke said, â€œThe dearth of adequate financing has been identified as one key factor inhibiting the much needed investment in critical infrastructure such as down and midstream petroleum distribution, telecommunications and transportation. Additionally, substantial long term financing would be required to rejuvenate Nigeriaâ€™s ailing power sector, its comatose refineries and the provision of socio-economic development in education and healthcare. Moreover, recent efforts by the FGN to diversify the economy and make it more market driven means that funds will also be needed to expand existing facilities to meet the increased demand expected of a more efficient economy over the long-term.â€
He stated that empirical evidence from both developed and developing economies shows that the development of efficient bond markets plays a significant role in economic growth and development process. â€œThe debt market is more popular than the equity market in most parts of the world but the reverse is the case in Nigeria. Nevertheless, the Nigerian capital market has transformed itself into a much more vibrant trading field for debt instruments from the rudimentary market of about a decade agoâ€ he added.
A review of the fixed income market in Nigeria shows that the reform of the pension industry has served as a catalyst for the growth of the debt market over the last 5 years.
Chioke stated that the fixed income market has grown from a market capitalization of N1.3trillion at the end of 2008 to N2.3trillion at the end of 2009. â€œThough significant progress has been made with respect to FGN bond market, the market for State bonds is still in its infancy while the corporate bond market remains practically non-existent. The secondary trading and settlement platform for both state and corporate bonds are also currently at the early stages of developmentâ€ he added.
It should noted that Afrinvest bond market report presents an update on the state of fixed income market in Nigeria and assesses the growth prospects of the domestic bond market with a view to addressing the concerns of domestic and international investors contemplating further engagements in our emerging frontier market.
â€œWe present the economic rationale for fixed income markets, assess its current state of development and outline the framework needed to strengthen the market and bring it to par with other developing fixed income markets around the world. It seeks to clarify a number of misconceptions currently prevailing in the domestic market regarding bond investmentsâ€ Chioke stressed.
The report also places due emphasis on the current state of Nigeriaâ€™s bond market infrastructure, issues to be resolved, features yet to be incorporated, practices to be adopted and products to be established.
While the Nigerian bond market currently offers an array of opportunities, Afrinvest said, â€œ we believe the market needs to be deepened in order to harness its full potentials for financing sustainable economic development. We believe that remedying these current gaps would ensure that the domestic bond market is able to develop to its full potential while maintaining sufficient transparency, liquidity and accessibility to all investors.â€