FG to check crowding out funds from equities market to bond – Nwankwo

As NSE admits 1 million FGN Eurobonds at par value of $1,000 per 

The federal government has assured that it would ensure that government debt instruments does not take away much needed funds required to boost the equities market.

Director General Debt Management Office (DMO) federal government’s debt management body, Dr. Abraham Nwankwo stated this on Thursday in Lagos , during the facts behind the listing presentation of the $1billion Euro bond, shortly after the bonds secondary listing on the Nigerian Stock Exchange (NSE) official list.

The Exchange admitted on its daily official list 1 million units of FGN Euro bonds at a par value of $1,000 per unit. The instrument prides as the first foreign currency denominated bond to be listed on the Nigerian Stock Exchange (NSE) secondary market on Thursday. The Euro bond is a 15-year domestic Sovereign Euro bond priced at par and at a coupon of 7.875 twice coupon per cent per Annum was

Director General, Debt Management Office (DMO) Dr. Abraham Nwankwo said that the listing provided Nigerians to take advantage of the instrument, trading on the secondary market. Adding that it is price and settled in foreign currency.

He said that the federal government is gradually shifting the mix from government borrowing to external borrowing in order to create more space for the private sector.

He said that the current spate of government borrowing was empowered by the 2010 policy direction to develop the domestic bond market
And that government pioneered the move by issuing sovereign bond, in order to create the enabling environment for the private sector to come into the scheme.

We are also sure that there are no crowding out effect of funds from the capital market to the debt instrument starving the market of funds

He said that the debt that the government is raising has been based on what has been approved, and taking into emphasis all that the government needs to do with the funds and also the approval that more of the funds required come from external sources.

“We leave more space for the corporates, for the domestic market to develop the bond market alongside the government.
In the 2016 budget , you finds out that nearly 50 per cent of the borrowing has to come from outside federal government borrowing, that was not so in the past.

Director General, Debt Management Office (DMO), Dr. Abraham Nwankwo said earlier on his visit to the Exchange that “the listing of domestic Sovereign Eurobond reinforces FGN’s commitment to deepen and grow the Nigerian capital market. Developing the domestic market can help bridge the infrastructure deficit constraining economic growth”.

Nwankwo noted that the Eurobond which was over-subscribed by 780%, is part of FGN’s funding strategy for its 2016 capital expenditure and will be spent on key infrastructure projects, in line with its economic plan.

“This huge oversubscription rate underscores a buoyant investor’s appetite for building exposure to Nigeria and demonstrates international confidence in the economy’s long term prospects”.

The bond funds distribution showed Asset management has a chunk of 73 per cent, hedge funds 13 per cent, Insurance/pension, 10 per cent, banks/ private banks have 3 per cent while other investors combined have 1 percent.
Also, on the allocation, the US has 48 per cent, UK, 37 per cent. Europe 10 per cent, while other investors have 5 per cent allocation of the 7.875 per cent per anum, payable on semi-annual basis.

Ade Bajomo, Executive Director Market Operations and Technology, Nigerian Stock Exchange (NSE) in his remark said that the Exchange admitted on its daily official list 1 million units of FGN Eurobonds at a par value of $1,000 per unit.

The listing, Bajomo said is a testament of the Federal Government’s and DMO’s commitment to the growth and enhancing the depth of the Nigerian Capital Market.
He explained that , the Euro bond, as an FX denominated instrument, will trade and settle in its currency of issuance (USD); thus setting the foundation for multi currency capital raising and trading in the domestic market.

“This will open up hybrid capital raising options and create additional portfolio diversification opportunities for investors< Bajomo said.