FGN Bonds, Eurobond, among other bonds on
the FMDQ Exchange market dropped by 26.24 per cent in 2021, data gathered by
THISDAY has revealed.
According to THISDAY findings, a total
turnover of N20.31trillion worth of FGN Bonds, Eurobonds, Agency, Sub-national,
Corporate, Supranational Bonds & Promissory Notes were traded in 2021 as
against N27.53trillion traded in 2020.
A breakdown revealed that a total turnover
of N19.36trillion FGN Bonds was traded in 2021 as against N26.9trillion in
2020, while Eurobonds trade grew significantly by 94.4 per cent to
N801.07billion in 2021 from N412.17billion in 2020.
Other bonds total turnover on the FMDQ
Exchange dropped by 38 per cent to N143.28billion in 2021 from N232.37billion
in 2020.
Out of the N20.31 trillion traded Bonds in
the FMDQ Exchange in 2021, FGN bonds contributed 95.35per cent, while Eurobonds
and Other bonds contributed 3.9per cent and 0.71per cent respectively.
FMDQ Exchange served as a critical Exchange
for issuance and government to access debt capital needed for capital projects.
Recently, the Debt Management Office (DMO)
announced that the federal government raised $4 billion through Eurobonds and
listed its $3 billion in three tranches for investors, offering up to 8.6 per
cent for a 30-year tenor.
The Eurobonds issued, was for the purpose
of raising funds for the new external borrowing of N2.34 trillion or about $6.2
billion provided in the 2021 Appropriation Act to part finance the deficit.
The debt office had revealed that federal
government in 2021 raised N2.72 trillion through FGN Bonds.
Analysts had urged the government to ensure
that the debt being incurred is used to improve on the country’s growth.
The amount raised through the FGN Bonds was
a 44 per cent improvement on what it raised through the bond auctions in 2020
when it raised N1.8 trillion.
Commenting on the debt level of the
country, analysts at Coronation Merchant Bank noted that as a percentage of
total GDP, Nigeria’s public debt burden is relatively low compared to peer emerging
market economies.
They however noted that the onus is on the
federal government to make productive use of the borrowed funds to improve GDP
growth and by extension, ensure economic development.
“The 2022 FGN budget has been pegged at
N16.4 trillion. The FGN aims to earn N10.13 trillion to fund the budget and the
resulting deficit of N6.3 trillion is expected to be financed by new external
and domestic borrowings, privatisation proceeds, and multilateral /bilateral
loan drawdowns, ”they stated.
Commenting, the Head, Retail Investment,
Chapel Hill Denham, Mr. Ayodeji Ebo said the Nigerian Eurobonds did not create
significant trading opportunities last year hence investors focused on
Eurobonds of other countries especially Sub Sahara Africa.
He added that there was significant
Eurobonds issuances by the FGN and Corporates in 2021 that reduced activities
in the secondary market.
On his part, analyst at PAC Holdings, Mr.
Wole Adeyeye said: “With respect to the Eurobond, we had few listed corporate
bonds on FMDQ last year. Many domestic companies did not issue Eurobond last
year as depreciation of Naira may increase the repayment of these loans.”
Meanwhile, total Foreign Exchange turnover
dropped by 2.27 per cent to N29.45trillion in 2021 from N30.14trillion in 2020.
Analysts attributed the decline to low FX
supply to the specialized investors and exports window to weak intervention by
the apex, stressing that the inflow in foreign exchange was another major
contributing factor.
The Vice President, Highcap Securities
Limited, Mr. David Adnori, said the decline in foreign exchange market turnover
between January and December of 2021 was as a result of scarcity caused by the
existing challenges of COVID-19 virus.
According to him: “A lot of the
transactions in the foreign exchange market went to the parallel market that
comes with higher price and the major reason for this is availability.”
He said the global trade has not fully
recovered from the COVID-19 pandemic lockdown, leading to weak supply of
foreign currencies into the Nigeria’s market.
He added that: “A lot of Nigerians in the
Diaspora who used to send remits are also faced with the impact of the
pandemic. Although, we have seen steady increase in crude oil price but the
backlog of hard currency demand from CBN has also affected supply.
“Foreign investors are also showing
interest due to challenges in their market. In addition, the federal government
is also committed to foreign currency spending and it also contributed to
supply.”
Adeyeye also attributed the decline in
turnover trade at the FMDQ foreign exchange market to scarcity.
Commenting on the development recently, the
Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele said the drop
in crude oil earnings and the associated reduction in foreign portfolio inflows
significantly affected the supply of foreign exchange into Nigeria.
He said, “In order to adjust for the
decrease in the supply of foreign exchange, the naira depreciated at the
official window from N305/$ to N360/$ and now hovers around N410/$.’’
He added, “Despite the rebound in economic
activities, the fragile recovery will keep the economy operating below full
capacity. The emerging food supply shocks associated with the drag in
production, due to insecurity situations across the country, combined with the
speculations on increase in the price of PMS and electricity tariff, will
continue to have knock-on pressures that will keep headline inflation above
desired levels.
“Inflation rate is nonetheless expected to
continue to decelerate in the short-term. The outlook for the external sector
remains stable, albeit susceptible to further external shocks. This is premised
on the expectation of sustained improvement in crude oil prices. The ongoing
policy on diaspora remittances is expected to attract foreign exchange inflow.
“Despite the optimism, downside risks to
the outlook remains. Concerns over the emerging third wave of the COVID-19 in
Europe and Asia could disrupt global supply chain and crude oil demand. In
addition, vulnerability to foreign exchange pressure, rising inflation,
insecurity across the country, infrastructure gap, and constrained fiscal
space, remain a challenge.”
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