By Michael Eboh
The Managing Director of First Securities Discount House (FSDH) Limited, Mr. Rilwan Belo-Osagie, has declared that a deepening of the countryâ€™s bond market would address the issue of the elitist posture of the market and would give retail investors the opportunity to invest and enjoy the numerous benefits associated with investing in bonds.
Speaking in Lagos, at a forum heralding its forthcoming Annual General Meeting, Managing Director of the company, Osagie called on the Federal Government, state governments and corporate organisations to issue more bonds as this will help deepen the market.
He stated that a deepening of the bond market will bring about an increase in activity in the market, as operators would be encouraged to introduce attractive products, such as mutual funds.
He added that the introduction of mutual funds that is designed to invest certain amount of its resources in money market instruments, would indirectly allow investors participate in the market by investing in the funds.
He blamed complex pricing mechanisms and high costs of the bonds for the low patronage and seemingly elitist nature of the bond market.
He commended the federal government and authorities in the financial system for their effort at increasing patronage and encouraging operators in the market, through the reduction of taxes, introduction of rebates and waivers.
He, however, noted that the full impact of the incentives and waivers have not been felt in the market, as only a few state governments have taken advantage of the incentives to float bonds.
He said, â€œThere have always been various incentives in the bond market, especially in the area of taxation. Presently, further incentives have been introduced and these have been directed at further increasing patronage in the market.
â€œHowever, only a few states have taken advantage of that opportunity, we have not seen any corporate bonds yet.
â€œThe bond market have been looked at as an elitist market partly because of the difficulty involved in calculating the prices, yields among others. This has made it difficult for it to be an all-comers affair, as only very few companies and investors understand the mechanism of the market.
â€œThere is a need for the deepening of the market, as this will help bring about an increase in the level of activity in the market.
â€œAn increase in the level of activity in the market will see operators introducing various products such as mutual funds. These funds will have a portion or all of their resources invested in bonds. Investors will invest in these mutual funds, thereby, investing in the bond market indirectly.â€