As most Nigerians continue to decry the increasing public debt stock of Federal Government, others look at the the lucrative investment opportunities in some of the debt instruments.
These debt instruments refer to the various Federal Government of Nigeria (FGN) Securities, which make up the local component of government debt .
In recent times, the Debt Management Office (DMO), the government department saddled with the responsibility of coordinating the management of the country’s debt, embarked on awareness drive, to educate retail investors about the benefits of investing in these debt instruments.
The awareness drive, which was inaugurated in Lagos in March, has also been taken to Enugu in the Southeast, Ibadan in the Southwest and Kano in the Northwest .
FGN Securities refer to the FGN Bond, FGN Savings Bond, FGN Green Bond, the Sovereign Sukuk, the Eurobond and Treasury Bills.
Patience Oniha, the Director-General of DMO, said the aim was to sell the various existing FGN securities to the Nigerian public.
Oniha said the various FGN Securities, apart from raising funds to finance government projects, also offered attractive investment opportunities for Nigerians.
According to her, the Federal Government, through the DMO, issues the securities and makes periodic interest payments to the investors, while the principal is paid at the end of each tenor.
“The Federal Government has various investment platforms like the FGN Bond, FGN Savings Bond, Treasury Bills, the Green Bond, the Soveriegn Sukuk and Eurobond.
“One function of these FGN Securities is to raise capital to finance deficits in the budget, and also to raise funds to execute critical infrastructural projects.
“They are backed by full faith and credit of the Federal Government of Nigeria, and are default risk-free,” she said.
She said that the FGN Securities also contributed to the development of the domestic capital market, adding that they served as benchmark for other private institutions to issue their own securities.
“They enhance the savings and investment opportunities of the populace, thereby promoting financial inclusion.
“They also attract foreign investors into the domestic financial market, to refinance maturing domestic debt and to diversify sources of funding for the Federal Government.
“You can use them as collateral to obtain loans from banks and other financial institutions, and they help in diversification of investment portfolio.
“They are also a source of steady income, as investors’ interests are paid every six months or every three months, and they are tradable on the stock exchange, ” she said.
According to her, FGN Bond is the flagship of the FGN Securities
“It is the longest of the existing FGN Securities. It offers medium term to long term investments , from five years to seven years, to 10 years, 20 years and 30 years.
“It is offered every month, with minimum subscription of N50 million, and in multiples of N1000 thereafter, and coupon payment are made every six months.
“The second product, the FGN Savings Bond is designed with retail investors in mind.
” It is issued every month, with a minimum subscription of N5,000 and in multiples of N1000, subject to a maximum of N50m ” Oniha said.
She said that the Eurobond was issued in dollars, and designed to provide exposure to foreign investment that stayed in the country.
“When you invest in Eurobond you are owning a dollar-denominated assets, and that adds foreign exchange exposure to your portfolio, while also boosting the nation’s external reserves,” she said.
She described the Sovereign Sukuk as a Sharia-compliant Security that represents interests of the owner in an asset or pull of assets.
“The Sukuk ensures that every financial activity is backed by real economic activity, and there are specific infrastructural projects linked to the Sukuk investment,” she said.
She said that the FGN Green Bond is a fixed-income security used to finance projects that have positive impact on the environment and to provide solution to climate change.
She added that Treasury Bills were short-term securities issued with tenors of 91 days, 182 days and 365 days.
“The minimum for this investment is N50m, ” she said.
Oniha said that the objective was to ensure that many more Nigerians became aware of the huge investment opportunities so they could take advantage of them.
“The purpose is to introduce DMO to the people. Some might have read one or two things about us in the newspapers, but the Nigerian people are a very important set of stakeholders we must engage.
“Also, we have to educate the general public about the various products that we offer. We are talking of investment products similar to shares, but this is the other side of shares.
Mr Monday Usiade, the Director, Market Development Department of the DMO, urged Nigerians to embrace investment in the various FGN Securities to enhance their earnings.
According to Usiade, it is more profitable for Nigerians to invest their monies in the FGN Securities.
“Saving is a culture we must all imbibe, and the FGN Securities have come to help Nigerians save.
“The driving force is to encourage us to save in a secure environment. The Federal Government cannot default on a loan in its own currency,’’ he said.
He said that the various FGN Securities were already competing with the Deposit Money Banks (DMBs), adding that there was the need to challenge the DMBs to improve on their service delivery.
He, however, described the banks and Stockbroking firms as “partners in progress” with the DMO.
“We can encourage Nigerians to invest in the various Federal Government Securities to diversify their investment portfolios and improve their earnings.
“We cannot undermine the integral role of the DMBs in the financial system and in delivering our mandate. We also need the banks to execute our mandate,” he said.
A stockbroker, Mr Abiodun Fagbohun, said the DMO designed the FGN Savings Bond to accommodate small-time, retail investors.
According to Fagbohun, in the past, institutions like banks and pension funds administrators were the ones who took advantage of FGN Securities.
He added that the DMO, along with the stockbroking community, was trying to ensure that the general public can participate in the bond market.
“We created this window through the FGN Savings Bond, whereby retail investors with as low as N5,000 can also participate in the market.
“For example, if you put about N10,000 in your savings account, you will earn like two per cent interest per annum.
“With the FGN savings bond, you can earn between nine per cent and 10 per cent interest per annum.
“It is a good opportunity which was not there for the retail investors before now,’’ he said.
Another stockbroker, Mr Kayode Olayemi, said that it had become increasingly imperative to create awareness about government securities among retail investors.
Olayemi said that ordinary Nigerians also deserved the opportunity to invest and benefit from the huge opportunities in the products.
He said that the FGN Securities served as a benchmark for other private institutions to be able to issue their own debt securities.
“Government securities also enhances the saving and investment opportunities of the populace, thereby, promoting financial inclusion, ” he said.
Mr Adeyinka Sonekan, Divisional Head, Sales and Business Development of a stockbroking firm urged Nigerians to take advantage of the investment opportunities to key into the financial system and also improve their finances
According to Mr Fortune Ibe of CSL Stockbrokers Limited, the investment in FGN Securities is an additional way for Nigerians to make money.
“The Federal Government is telling Nigerians that they can borrow their money for infrastructure and they will get interest rate on it.
“The interest rates on FGN securities is higher than what the banks will give you.
“With as little as N5,000, Nigerians can now invest in FGN Savings Bond . It is an avenue through which the government raises funds to develop infrastructure.
“It also contributes to the development of the financial market, attracts foreign investors into the financial market and enhances savings and investment opportunities of the populace,’’ he said.
As the expenditure needs of government continue to grow in the midst of scarce resources and imperative to borrow, stakeholders are encouraging Nigerians to lend to government by investing in its various security instruments, which constitute the local component of government borrowings.
They say such investment will also help to promote and encourage financial inclusion, while growing the local capital market.
FGN Securities can be sold for cash at the Nigeria Stock Exchange, and they are acceptable as collateral for loans by banks.
They are also good for savings towards retirement, marriages, payment of school fees and for housing projects.
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