Re­tail in­vestors still don't un­der­stand FGN sav­ings bond – DMO DG

Daily Trust - - MONDAYBUSINESS - By Lat­i­fat Opoola

Last week, the Fed­eral Gov­ern­ment pre­sented a cheque of N100 bil­lion sov­er­eign Sukuk pro­ceeds to the Min­istry of Power, Works and Hous­ing for the con­struc­tion and re­ha­bil­i­ta­tion of 28 key eco­nomic roads un­der the 2018 cap­i­tal vote. The Di­rec­tor Gen­eral of Debt Man­age­ment Of­fice, Pa­tience Oniha, re­sponded to some ques­tions from jour­nal­ists after the cheque pre­sen­ta­tion. Ex­cerpts:

How has the di­ver­si­fi­ca­tion of FGN sav­ings bond gone so far?

Our goal for the Fed­eral Gov­ern­ment sav­ings bonds, up till 2009, was to di­ver­sify that in­vestor base be­cause when you look at it, up till 2008 the banks were tak­ing up about 64-65% of our auc­tions but now they are tak­ing much smaller be­cause we have reached out to pen­sion funds, in­sur­ance com­pa­nies, and other in­sti­tu­tions and I think it is a good thing. But the de­crease you are see­ing in the level of sub­scrip­tion and the inch­ing up of the in­ter­est rate has to do largely with liq­uid­ity in the sys­tem.

If we look at the FGN sav­ings bond, it is tar­geted at re­tail in­vestors, so it’s like the small in­vestors some­how don’t un­der­stand the FGN bond and don’t even know how to in­vest in it. Also our pri­mary dealer mar­ket mak­ers were al­ways seat­ing in their head of­fices and deal­ing with larger in­sti­tu­tions. So we needed to come down and open a win­dow for the re­tail in­vestors.

I be­lieve sub­scrip­tion was good, but I wouldn’t say very high when we look at our ex­pec­ta­tions. What has also hap­pened is if you buy this month with the sav­ings you have you may not have built up enough sav­ings to in­vest in it again, so the re­tail in­vestors typ­i­cally have to build up sav­ings to be able to in­vest.

So what are we do­ing? We are do­ing a lot of sen­si­ti­za­tion. Last year we had out­reaches to the mar­kets, to pro­fes­sional bod­ies and we plan to do that as well this year.

How are you count­ing the suc­cess in the FGN sav­ings bonds?

Re­ally in terms of the num­ber of in­vestors we are get­ting, we will be glad to have larger vol­umes but be­ing able to get more first time in­vestors is also suc­cess for us and at the last count we had reached about 10 thou­sand for the fed­eral sav­ings bonds and that’s a mea­sure of suc­cess for us.

Would you say that the elec­tions com­ing up could have any ef­fect on for­eign in­vestors pulling out their monies or is­sues like that?

I think I won’t tie it to the elec­tions, I would say what’s hap­pen­ing glob­ally, es­pe­cially to in­ter­est rates in the in­ter­na­tional mar­kets, and for­eign in­vestors are look­ing for op­por­tu­ni­ties wher­ever in the world it is safe and where the re­turns are good and also where they can come in and go out eas­ily; maybe where there is ease of en­try and exit. So to that ex­tent I will say there are prob­a­bly big­ger is­sues hap­pen­ing out­side in terms of US in­ter­est rate that would af­fect them more than the elec­tions.

But let me quickly say I be­lieve in May 2015 we ac­tu­ally had a higher sub­scrip­tion level from for­eign in­vestors. When I say higher, one would think oh! they were wait­ing to see what hap­pens but that auc­tion was ac­tu­ally higher.

Hav­ing said that let’s look at our strat­egy in gen­eral. We are not look­ing at con­cen­trat­ing on one in­vestor which ex­plains why we started di­ver­si­fy­ing to var­i­ous in­vestor seg­ments. We are happy to have for­eign in­vestors but we also want to have more do­mes­tic in­vestors par­tic­i­pat­ing in the mar­ket.

We have seen the use of Sukuk to fund in­fra­struc­ture, aside roads are you think­ing of fund­ing other in­fras­truc­tural fa­cil­i­ties?

That should be in the works but al­ways re­mem­ber what we are fund­ing with the Sukuk. The Sukuk is not a dif­fer­ent bor­row­ing; it is bor­row­ing that was al­ready in­cluded in the bud­get and projects also in­cluded in the bud­get so you are right, our first ex­pe­ri­ence was last year and we are do­ing roads be­cause the im­pact was so huge and we tried that model and it worked. So go­ing

Should we wait for Sukuk be­fore we tie bor­row­ing to projects?

With the way you say tie bor­row­ing to projects, don’t for­get cap­i­tal re­leases that are done with the Min­istry of Fi­nance also goes to cap­i­tal projects. What we have done is to iso­late these ones and tied it to them. But I think what the me­dia should help us to do is more aware­ness; we can’t do it alone and you have a much wider reach than we do. We would like to say for in­stance there are

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