By Kadiri Abdulrahman, News Agency of Nigeria (NAN)
While most Nigerians continue to decry the growing stock of federal government public debt, others are looking at the lucrative investment opportunities in some of the debt instruments.
These debt instruments refer to the various securities of the Federal Government of Nigeria (FGN), which constitute the local component of public debt.
FGN Securities refers to FGN Bonds, FGN Savings Bonds, FGN Green Bonds, Sovereign Sukuk, Eurobonds and Treasury Bills.
Recently, the Debt Management Office (DMO), the government department responsible for coordinating the country’s debt management, has embarked on an awareness campaign, to educate retail investors on the benefits of invest in these debt instruments.
The awareness campaign, which was launched in Lagos in March, was also carried out in Enugu in the southeast, Ibadan in the southwest and Kano in the northwest.
Patience Oniha, Managing Director of DMO, said the aim was to sell the various existing FGN titles to the Nigerian public.
Oniha said that the various FGN Securities, in addition to raising funds to finance government projects, also provide attractive investment opportunities for Nigerians.
According to her, the federal government, through the DMO, issues the securities and pays periodic interest to investors, while the principal is paid at the end of each term.
“The Federal Government has various investment platforms such as FGN Bonds, FGN Savings Bonds, Treasury Bills, Green Bonds, Sovereign Sukuk and Eurobonds.
“One of the functions of these FGN Securities is to raise capital to finance budget deficits, as well as to raise funds to execute critical infrastructure projects. They are backed by the full faith and credit of the Federal Government of the Nigeria, and are default risk free,” she said in a recent media report.
She said FGN securities have also contributed to the development of the national capital market, adding that they serve as a benchmark for other private institutions to issue their own securities.
“They improve people’s savings and investment opportunities, thereby promoting financial inclusion.
“They are also attracting foreign investors to the domestic financial market, to refinance maturing domestic debt and diversify sources of federal government funding. You can use them as collateral to get loans from banks and other financial institutions, and they help diversify the investment portfolio,” she added.
Due to its potential to deliver returns on investment, Mr. Monday Usiade, Director of Market Development Department, DMO, urged Nigerians to embrace the various FGN titles.
According to Usiade, it is more profitable for Nigerians to invest their money in FGN Securities.
“Saving is a culture we all need to embrace, and FGN Securities has 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 securities of the FGN were already in competition with the depository banks (DMBs), adding that there was a need to challenge the DMBs to improve their service delivery.
According to him, the securities could also serve as a means of diversifying investments because it could be too risky for an investor to put all their eggs in one basket.
“We can encourage Nigerians to invest in the various federal government securities to diversify their investment portfolios and enhance their incomes. But we cannot undermine the integral role of DMBs in the financial system and in carrying out our mandate. We also need the banks to deliver on our mandate,” he said.
Financial experts warn that investors must be properly informed of the risks associated with investing in securities such as bonds, including the influence of inflation on returns; what happens to investment in the face of the inability of corporate bond issuers to repay debt.
However, some members of the investment dealer community say they believe federal government securities are worth a try.
According to a stockbroker, Mr. Abiodun Fagbohun, with FGN savings bond you can earn between 9% and 10% interest per annum, adding that it is a good opportunity which did not exist before for retail investors.
According to Fagbohun, in the past, institutions such as banks and pension fund administrators have benefited from FGN Securities.
He said the DMO, along with the investment dealer community, was trying to ensure that the general public could participate in the bond market.
“We have created this window through the FGN Savings Bond, through which retail investors with as little as N5,000 can also participate in the market.
“For example, if you put around 10,000 naira in your savings account, you will earn around 2% interest per year,” he said.
Another stockbroker, Mr Kayode Olayemi, said it has become increasingly imperative to educate retail investors about government securities and how they can benefit from them.
Olayemi said government securities also improve people’s savings and investment opportunities, thereby promoting financial inclusion.
Mr. Adeyinka Sonekan, Division Manager, Sales and Business Development of a brokerage firm, urged Nigerians to take advantage of investment opportunities to enter the financial system and also improve their finances.
According to Mr. Fortune Ibe of CSL Stockbrokers Limited, investing 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. Interest rates on FGN securities are higher than what the banks will give you,” Ibe said.
As government spending needs continue to grow amid scarce resources and the imperative to borrow, stakeholders are encouraging Nigerians to lend to the government by investing in its various security instruments, which constitute the local component of the government loans.
They claim that these investments will also help promote and encourage financial inclusion, while developing the local capital market.
Experts say FGN securities can be sold for cash on the Nigerian Stock Exchange and are acceptable as collateral for bank loans.
They are also good for saving for retirement, weddings, paying school fees, and for housing projects. (NANFatures)
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