In the first five months of this year, the value of listed Federal Government of Nigeria bonds on the Nigerian Exchange Limited has dropped dramatically by 93.2 percent to N183 billion from N2.7 trillion in the same period of 2022.
According to Vanguard, the results from the Exchange show that the majority of the bonds listed on the exchange this year were FGN Savings Bonds, as opposed to the previous year’s mix of Federal Government Bonds and Savings Bonds.
According to analysts, the Federal Government borrowed less money from the main market during the review period than it did during a similar period in 2022, as seen by the drop in the listing of the FGN Bond this year.
Analyst and Executive Vice Chairman of HighCap Securities Limited, David Adonri, responded to this development by saying: “The reduction of FGN Bond listing could be an indication that government borrowed less in the domestic market and its implication is that it could affect liquidity in the secondary market.
“Although the decline could also be due to the FGN Bonds not being listed on the Exchange during the review period as only the Savings Bonds were captured,” he continued.
“The most recent government has taken on more debt, both internally and outside. Due to this, there is a higher chance of economic disaster and sovereign default.
“Nigeria’s ability to earn hard currency may not be sufficient now or in the near future to allow the current administration to pay off the growing international debt.”
He added that internal borrowing has now grown to an alarming extent that it is pushing out the real estate sector’s productive sector.
The drop in the listing of FGN Bond on the Exchange is due to the FGN Bond not being listed, according to Analyst and Head of Research and Investment, Victor Chiazor, at Fidelity Securities Limited.
“Using debt carelessly as a means of financing can come with fatal risks. Even more sad is when debts are primarily utilized to support consumer spending or to sloppily fund a little amount of secondary infrastructure (roads and rail).
“These won’t increase the effectiveness of Nigeria’s light industries nor make the economy self-reliant.”
