Connect with us

Markets

Market Experts Explain Low Patronage of FGN Savings Bonds

Published

on

bonds
  • Market Experts Explain Low Patronage of FGN Savings Bonds

Capital market operators have advised the Debt Management Office (DMO) to embark on more aggressive awareness creation in order to attract more patronage for the Federal Government of Nigeria Savings Bonds (FSB).

The DMO had last March introduced the FSB on behalf of the federal government as part of its efforts to promote savings culture in Nigeria and improve financial inclusion, particularly amongst retail investors.

The bond is expected to also provide additional funding for the government. However, investors’ participation in the FSB has remained poor despite the increase in the coupon rate (interest rate) on the bond.

For instance, the amount allotted dropped consistently from N2.07billion in March 2017 to N400.57million in July 2017, while the total number of investors also dropped from 2,575 in March 2017 to 779 in July 2017.

The coupon rate on the 2-year Bond, which was 13.01 per cent in March 2017 stood at 13.39 per cent in July 2017 while the coupon rate on the 3-year Bond which was 13.79 per cent in April, the first time a 3-year bond was issued, stood at 14.39 per cent in July 2017.

The coupon rates for the August 2017 offer are 13.535 per cent and 14.535 per cent for the 2-year bond and 3-year bond respectively. This means that the August bond issues carried higher coupon rates than the July issues and represent the highest coupon rates since inception.

But the persistent increase in the coupon rates, have not attracted enough subscription to the bond despite the steady decrease in the inflation rate in the country since January 2017.

Commenting on the development, analysts at FSDH Research said one of the factors responsible for the poor patronage of FSB is we can attribute is the rally that dominated the equity market in Nigeria.

“The Nigerian Stock Exchange All Share Index (NSE ASI) appreciated by 51.47% between March 01, 2017 and August 9, 2017. Many retail investors diverted funds to the equity market to take advantage of capital appreciation. Other factors are: the low awareness of the benefits and characteristics of the Bond; the low liquidity of the Bond at the secondary market and the high yield on the Nigerian Treasury Bill (NTB),” they said.

Speaking on how to increase investors’ patronage, they said the DMO and the stockbrokers can organise investors’ road shows in various cities and schools across the country.

“This will be an avenue to directly engage retail investors on the need for them to hold the bonds in their investment portfolio. The DMO can work with some identified large corporate organisations that have large number of employees to encourage their employees to invest in the Bonds on a monthly basis. The DMO can also work with government agencies to encourage civil servants to invest in the bond,” the analysts stated.

According to them, these strategies should be able to attract a minimum of one million subscribers on a monthly basis.

“If this is achieved and the monthly subscription amount increases, the overall weighted average interest rate on the FGN debt will drop,” they said.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Continue Reading
Comments

Crude Oil

Sirius Petroleum and Baker Hughes Collaborate on OML 65 Drilling in Nigeria

Published

on

sirius petroleum- Investors King

Sirius Petroleum, the Africa-focused oil and gas production and development company, has signed a memorandum of understanding with Baker Hughes. The MoU names Baker Hughes as the approved service provider for Phase 1 of the Approved Work Program (AWP) of the OML 65 permit, a large onshore block in the western Niger Delta, Nigeria. Baker Hughes will provide a range of drilling and related services at a mutually agreed upon pricing structure to deliver the initial nine-well program.

Sirius has signed various legal agreements with COPDC, a Nigerian joint venture, to implement this program. COPDC has signed a Financial and Technical Services Agreement (FTSA) with the Nigerian Petroleum Development Company (NPDC) for the development and production of petroleum reserves and resources on OML 65. The FTSA includes an AWP which provides for development in three phases of the block. and Sirius has entered into an agreement with the joint venture to provide financing and technical services for the execution of the PTA.

The joint venture will initially focus on the redevelopment of the Abura field, involving the drilling and completion of up to nine development wells, intended to produce the remaining 2P reserves of 16.2 Mbbl, as certified by Gaffney Cline and Associates (GCA) in a CPR dated June 2021.

Commenting, Toks Azeez, Sales & Commercial Executive of Baker Hughes, said: “We are extremely happy to have been selected for this project with Sirius and their JV partners. This project represents an important step towards providing our world-class integrated well-service solutions in one of the most prolific fields in the Niger Delta. Baker Hughes’ technological efficiency and execution excellence will help Sirius improve its profitability and competitiveness in the energy market.”

Bobo Kuti, CEO of Sirius, commented: “We are delighted to have secured the services of one of the world’s leading energy technology companies to work with our joint venture team to deliver the approved work program on the block. OML 65. We look forward to building a long and mutually beneficial partnership with Baker Hughes.”

Continue Reading

Energy

Egbin Decries N388B NBET Debt, Idle Capacity

Published

on

Egbin-Power-Plant - Investors King

Egbin Power Plc, the biggest power station in Nigeria, has said it is owed N388bn by the Nigerian Bulk Electricity Trading Plc for electricity generated and fed into the national grid.

The company disclosed this on Tuesday during an oversight visit by the Senate Committee on Privatisation, led by its Chairman, Senator Theodore Orji, to the power station, located in Ikorodu, Lagos.

The government-owned NBET buys electricity in bulk from generation companies through Power Purchase Agreements and sells it to the distribution companies, which then supply it to the consumers.

The Group Managing Director, Sahara Power Group, Mr. Kola Adesina, told the lawmakers that the total amount owed to Egbin by NBET included money for actual energy wheeled out, interest for late payments and available capacity payments.

Egbin is one of the operating entities of Sahara Power Group, which is an affiliate of Sahara Group. The plant has an installed capacity of 1,320MW consisting of six turbines of 220 megawatts each.

The company said from 2020 till date, the plant had been unable to utilize 175MW of its available capacity due to gas and transmission constraints.

Adesina said, “At the time when we took over this asset, we were generating averagely 400MW of electricity; today, we are averaging about 800MW. At a point in time, we went as high as 1,100MW. Invariably, this is an asset of strategic importance to Nigeria.

“The plant needs to be nurtured and maintained. If you don’t give this plant gas, there won’t be electricity. Gas is not within our control.

“Our availability is limited to the regularity of gas that we receive. The more irregular the gas supply, the less likely there will be electricity.”

He noted that if the power generated at the station was not evacuated by the Transmission Company of Nigeria, it would be useless.

Adesina said, “Unfortunately, as of today, technology has not allowed the power of this size to be stored; so, we can’t keep it anywhere.

“So, invariably, we will have to switch off the plant, and when we switch off the plant, we have to pay our workers irrespective of whether there is gas or transmission.

“Sadly, the plant is aging. So, this plant requires more nurturing and maintenance for it to remain readily available for Nigerians.

“Now, where you have exchange rate move from N157/$1 during acquisition in 2013 to N502-N505/$1 in 2021, and the revenue profile is not in any way commensurate to that significant change, then we have a very serious problem.”

He said at the meeting of the Association of Power Generation Companies on Monday, members raised concern about the debts owed to them.

He added, “All the owners were there, and the concern that was expressed was that this money that is being owed, when are we going to get paid?

“The longer it takes us to be paid, the more detrimental to the health and wellbeing our machines and more importantly, to our staff.”

Adesina lamented that the country’s power generation had been hovering around 4,000MW in recent years.

Continue Reading

Crude Oil

Oil Rises on U.S. Fuel Drawdowns Despite Surging Coronavirus Cases

Published

on

U.S. Crude Oil - Investors King

Oil prices climbed on Wednesday after industry data showed U.S. crude and product inventories fell more sharply than expected last week, reinforcing expectations that demand will outstrip supply growth even amid a surge in Covid-19 cases.

U.S. West Texas Intermediate (WTI) crude futures rose 48 cents, or 0.7%, to $72.13 a barrel, reversing Tuesday’s 0.4% decline.

Brent crude futures rose 34 cents, or 0.5%, to $74.82 a barrel, after shedding 2 cents on Tuesday in the first decline in six days.

Data from the American Petroleum Institute industry group showed U.S. crude stocks fell by 4.7 million barrels for the week ended July 23, gasoline inventories dropped by 6.2 million barrels and distillate stocks were down 1.9 million barrels, according to two market sources, who spoke on condition of anonymity.

That compared with analysts’ expectations for a 2.9 million fall in crude stocks, following a surprise rise in crude inventories the previous week in what was the first increase since May.

Traders are awaiting data from the U.S. Energy Information Administration (EIA) on Wednesday to confirm the drop in stocks.

“Most energy traders were unfazed by last week’s build, so expectations should be high for the EIA crude oil inventory data to confirm inventories resumed their declining trend,” OANDA analyst Edward Moya said in a research note.

On gasoline stocks, analysts had expected a 900,000 barrel decline drop in the week to July 23.

“The U.S. is still in peak driving season and everyone is trying to make the most of this summer,” Moya said.

Fuel demand expectations are undented by soaring cases of the highly infectious delta variant of the coronavirus in the United States, where the seven-day average for new cases has risen to 57,126. That is about a quarter of the pandemic peak.

Continue Reading




Advertisement
Advertisement
Advertisement

Trending