The Securities and Exchange Commission (SEC) has in recent times taken steps to address the perceived dormancy in the corporate bonds market.
The market presently has a low level of secondary market activities, apparently because of the dearth of corporate bonds in the segment.
The N30.5 billion UBA bond combined with the N12.95 billion bond of African Development Bank boosted the capitalisation of the debt sector from N5.520 trillion to N5.564 trillion, having dominance from the federal government bond, while corporate bond space is gradually coming alive.
Speaking on the issue, the managing director of Dependable Securities Limited, Mr Chimenyim Anyanwu said that the reduction in the fees charged on bonds by the Nigerian Stock Exchange (NSE) would enhance activities in the bond market, because it would attract more companies to the market.
He noted that much activities are not going on in the bond market, adding that the effect is to encourage investors to diversify their portfolio.
Also commenting on the issue, the managing director of APT Securities and Funds Limited, Mallam Garuba Kurfi said that the capital market regulators should come up with policies that will boost the corporate bond. “The emergence of corporate bonds in the market would reduce the overcrowding of government bonds.”
Kurfi said that the capital market offer cheap long-term financing for development projects when compared with borrowing from the commercial banks.
“The effect is to deepen, diversify portfolio and to encourage investors and new companies to come and invest in the bonds market”, he said.
On his part, the managing director of Highcap Securities Limited, Mr David Adonri, pointed out that there is no doubt about the appetite in bonds among corporate Nigeria but the move is to create the awareness and get the retail investors to develop the appetite for this asset class.
“The approach is to make them see the benefits in this asset class as compared to other classes they are already used to. The major advantage of fixed income is the fact that it possesses the combined nature and benefits of equities and fixed deposit.
“Most investors do not currently understand the fact that there is room for capital appreciation like equities while returns, in terms of coupon payment, is guaranteed as in fixed deposit. Above all, performing our role as government stockbroker, retail investors are sure of an exit window in case they decide to exit from the investment before maturity date,” he said.
The executive director of Sterling Bank Plc, Abubakar Suleiman in an interview with newsmen explained that the challenge for companies in going into bond, is that corporate organisations have not structured themselves as well as they could, so their standard of reporting and accounting is not as high as it ought to be as this would affect their going into the bond market.
He noted that with the companies’ paper market which is a first step towards going into a bond market, very few would be able to get a rating. There has to be a transformation, not just in the market but also in the corporate themselves.
The SEC director-general designate, Mr Mounir Gwarzo, disclosed during a briefing of capital market correspondents at the end of the first quarter of 2015 Capital Market Committee, CMC meeting, that the commission is taking steps to address the perceived dormancy in the corporate bonds market.
Source : Leadership