By Miichael Eboh
EXPERTS in the Nigerian capital market have attributedÂ low coupon rates and low awareness for the inactivity and unattractiveness of the nationâ€™s bond market.
The experts who spoke to Vanguard at different fora stated that immense potentials and opportunities in the bond market may not be realised unless the authorities in the capital market address the issues militating against the growth of the sector.
Mr. Seye Adetunbi, a financial expert and Chief Responsibility Officer, Value Investing Limite said, â€œ lower yields and competition from the equities market have been a major factor taking the shine away from the bond market.â€
He said, â€œInformed and discerned investment is a function of returns accruable to the investors predominantly among other factors. Level of activity in the secondary market in Nigeria and any market for that matter is a function of a willing exit and a ready entrant.
Major players in this sector are not the retail investors or what I call marginal players. A considerable percentage of them are banks, fund managers, Pension Funds Administrators (PFA), insurance companies and other ranks of institutional investors, that are by statute, required to have a given percentage of their investment portfolio in quoted securities.
â€œIn essence, to some, it is a compliance issue and exit may not fall short of regulatory provision and their corporateâ€™s set investment criteria; if thereÂ is no inflow of fresh investible funds.
â€œMoreover, in the absence of a new high yield bonds, coupled with a currently challenged equity sector, trading, exiting may not be attractive. Also for a new entrant, when money offers a higher yield, taking position through the secondary market window may not be attractive! Remember, the motive is maximixe earnings with the minimum risk.
â€œIn a nutshell, it is all matter of market forces, vis-a-vis availability of investible funds and opportunities the market provide by competing financial market instruments both in the money and capital market.
Also speaking, Mr. Amaeze Olisaemeka, a stockbroker and General Manager, Apex Securities Limited, blamedÂ the authorities for the low level of activities in the bond market,Â while calling on them to increase patronage of the sector by creating the awareness necessary to drive the interest of investors.
He said, â€œThe authorities can encourage trading in bonds by giving a lot of incentives, not only to companies that can place debentures and some other debt instruments, but also by encouraging both Federal and state government to issue more.
It is also necessary to encourage the investors and market operators as well, so that the instruments could be attractive.â€œOn the part of investors, considering the rate of inflation that has been on the increase in recent times, it is like investors are getting negative returns, because most of those bonds have fixed coupon or interest rates, inflation rate is high, you are getting negative returns.