Drastic Decline in FGN Bond Listings Raises Concerns Over Government Borrowing

Data from the Nigerian Exchange Limited (NGX) has shown that the value of listed Federal Government of Nigeria (FGN) Bonds on the exchange experienced a decline of 99.9% in the eight months ending on August 31, 2023.

Plummeting from N1.6 trillion recorded during the corresponding period in 2022 to a mere N148.2 billion.

The stark contrast in FGN Bond listings between the two years has raised eyebrows and prompted experts to delve into the implications of this significant shift.

Analysis of NGX data revealed that the bonds listed this year primarily consisted of the FGN Savings Bond and Sukuk, whereas the previous year featured a combination of both Federal Government Bonds and Savings Bonds.

Among the listings, the FGN Sukuk stood out with the highest recorded value of N130 billion for the period under review.

Analysts have identified several factors contributing to the stark decline in FGN Bond listings.

David Adonri, an analyst and Vice Executive Chairman at HighCap Securities Limited, commented on this development, and said, “The reduction of FGN Bond listing could be an indication that the government borrowed less in the domestic market, and its implication is that it could affect liquidity in the secondary market.”

He continued, “The decline could also be that the FGN Bonds were not listed on the Exchange during the period under review as only the Savings Bonds were captured as well as Sukuk.”

Adonri highlighted concerns about the country’s debt profile, both domestically and internationally, saying, “Both externally and internally, the immediate past government had taken more debt. This is increasing the risk of sovereign default and economic nightmares.” He also noted the adverse effects on the real sector, explaining that “the borrowing has now reached the alarming point of crowding out the productive real sector.”

Tajudeen Olayinka, an Investment Banker and Stockbroker, echoed similar sentiments, saying, “If there was an increase in debt listings in the market, it brings about increased liquidity and trading activities in the market, but the drop in the eight-month period could be largely as a result of higher yields in other competing instruments.”

Olayinka also speculated that “the drop in the FGN Bond listing could also be that there was less borrowing by the government in the primary market so not much to offer for listing in the secondary market.”