The consistent oversubscription of Federal Government bonds in the last five years is confirmation of success of various initiatives adopted to develop and deepen the securities market and the domestic debt market.
The Debt Management Office (DMO) said this in its 2016 Annual Report and Statement of Accounts obtained by the News Agency of Nigeria (NAN) on Friday in Abuja.
DMO said its initiatives and other stakeholders included the use of benchmark Federal Government bonds to enhance liquidity, amendment to existing guidelines or issuance of new guidelines by regulators to simplify the bond issuance process.
Others are reduction in issuance and transaction costs, widening the investor base, sensitisation of potential bond issuers and regular interactions with investors and other stakeholders.
It also said it issued five, 10 and 20 year benchmark bonds in the primary market.
In its analysis of trend of bonds allotments by residency, it said there was an increase in investor appetite by non residents in Federal Government bonds from 2012 to 2013.
It indicated that after that, there was a sharp drop in 2014, which persisted in 2015 and 2016.
DMO said the percentage of investors resident in Nigeria shifted from 97 per cent in 2015 to 98.62 per cent in 2016, while that of investors non-resident in Nigeria declined from three per cent in 2015 to 1.38 per cent in 2016.
“This indicates a decrease in the participation by investors non-resident in Nigeria at Federal Government bond auctions.
“The low level of participation in the Federal Government bond market by investors non-resident in Nigeria was minimal and due mainly to the exclusion of Federal Government of Nigeria bonds from the J. P. Morgan and Barclays Capital Indices in 2015.’’
It also said the analysis of bonds allotments by investor-type depicted that the Fund Managers and Non-Bank financial institutions accounted for 31.21 per cent of the total Federal Government of Nigeria bonds allotted in 2016.
This was followed by the Deposit Money Banks with 24.86 per cent, Pension Funds 21.82 per cent, Government Agencies 18.39 per cent, Insurance 1.60 per cent, Foreign Investors 1.38 per cent, Retail/ Other Institutional Investors 0.49 per cent and Individuals 0.25 per cent.
It predicted the outlook for the domestic bonds market in 2017.
“The emergence of a stable oil outlook towards the end of 2016 when combined with expected fiscal, monetary and foreign exchange policies responses are expected to improve liquidity in the Nigerian domestic bond market in 2017.
“The proposed introduction of the Federal Government of Nigeria Savings bonds and Sovereign Sukuk in 2017 is also expected to diversify sources of government funding, as well as investors’ base of the domestic bond market.
“The Federal Government of Nigeria bond primary market is envisaged to remain robust, supported by demand from domestic investors, especially the pension funds, while yields in the secondary market are expected to fall as inflation expectations decrease.’’
The DMO was established to manage Nigeria’s debt as an asset for growth, development and poverty reduction, while relying on a well motivated professional workforce and state-of-the-art technology.
It has a mandate to prepare and implement a plan for the efficient management of Nigeria’s external and domestic debt obligations at sustainable levels compatible with desired economic activities for growth and development.