FG rakes N7.3bn from savings bond in 2017

The Nigerian currency, Naira at the official foreign exchange market on Thursday appreciated further against US Dollar to close at N306.05, even as the Federal Government has raised a total sum of N7.3 billion in the past 10 months from its savings bond that was introduced in March 2017 to boost domestic investors’ participation in the bond market.

For the second day running during the week, the local currency appreciated by 0.02 per cent while compared closing rate of N306.02 against N306.10 traded on Wednesday at the official forex market.

At the Investors and exporters (I&E) FX window, the Naira started trading low at N360.05, per Dollar, lower than N359.85 that stood on Wednesday but closed at a better rate of N360.60, represented by 0.03 per cent compared to 360.70 recorded a day earlier and N360.82 recorded the last day before market closure for the Christmas holidays.

The Naira, however, remained unchanged at the parallel segment of the forex market, at N364 to the Dollar compared to N365 sold a week ago, while pound sterling stood at 484 sold on Wednesday, as well as Euro at N426 against 428 seen last Friday.

Meanwhile, the Federal Government this year planned to use the savings bond to finance the budget deficit, but investors appetite for investment in the savings bond diminished in the fourth quarter of 2017.

The December allotment figure shows that N246.41 million had been raised, the lowest savings bond Debt Management Office (DMO) generated this year over drop in coupon rate.

Analysts attributed the drop in savings bond coupon to improved macro economy.

The Managing Director, Highcap Securities Limited, Mr. David Adnori said, “the savings bond coupon rate dropped due to improvement in macro economy as interest rate is on decline in the economy.

He added that, “Rates on bonds and Treasury Bills (T-Bills) are all declining.”

The coupon rate allocated were 11.738 per cent for FGNSB DEC 2019, a two-year bond and 12.738 per cent for FGNSB DEC 2020, a three-year bond.

For November allotment, the figures shows that N256m had been raised through 12.091 per cent (FGNSB NOV 2019) two-year bond and 13.091 per cent (FGNSB NOV 2020) three-year bond.

Subscription in November was the second lowest as investors’ appetite started dropping.

Before November and December, the average coupon rate on FG’s saving bond was pegged at an average 12 per cent to 13 per cent with a two-year and three -year bond.

In October, the saving bond allotment dropped by 5.6 per cent to N389.19m from N412.7 billion following the slowdown in coupon rates.

The coupon rate assigned to a FGNSB OCT 2019 and FGNSB OCT 2020 in October was at 12.059 per cent and 13.059 per cent respectively, while in September, the coupon rate was at 13.817 per cent (FGNSB SEP 2019) and 14.817 per cent (FGNSB SEP 2020), respectively.

Before the last quarter of 2017, there was increased participation at the debt market in the first quarter as demand for T- Bills, FGN Bonds and the Savings bond increased relative to supply

Specifically, in March the debt office had raised N2.068 billion from the 13.01 per cent two year debt with 2,575 total number of successful subscriptions.

According to data obtained from DMO, showed that the initial auction of the Savings Bond still had the largest participation in the first quarter and started dropping in the second and third quarter.

At the end of first quarter, in April, DMO raised N1,288.02bn that comprises of N419.33m and N868.69m for a 12.794 per cent and 13.794 per cent, two- year and three-year savings bond respectively.

In May it raised N791.15bn with yields rising to 13.189 per cent for the two-year paper and 14.189 per cent for the three-year allotment.