By Peter Egwuatu
The value of listed Federal Government of Nigeria, FGN, Bonds on the Nigerian Exchange Limited, NGX, has declined drastically by 93.2 percent to N183 billion in the first five months of this year from N2.7 trillion in the corresponding period of 2022.
Vanguard’s findings from the Exchange showed that the Bond listing on the exchange this year were mainly the FGN Savings Bond while that of the previous year were a combination of both Federal Government Bond and Savings Bond.
Analysts stated that the decline in the listing of the FGN Bond this year showed that the Federal Government had borrowed less money from the primary market during the period under review compared to the corresponding period of 2022.
Reacting to this development, analyst and Executive Vice Chairman, HighCap Securities Limited, Mr David Adonri, said: “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.
Continuing, he stated: “Although 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.
“Both externally and internally, the immediate past government had taken more debt. This is increasing the risk of sovereign default and economic nightmares.
“The hard currency earning capacity of Nigeria may also not be sufficient, now and in near future, to enable the present government to service the mounting foreign debt.
“Internally, the borrowing has now reached the alarming point of crowding out the productive real sector.
“This poses grave danger to the capacity of the real sector to create wealth and generate productive employment. In every capitalist economy like ours, government has primary obligation through policies and actions to prevent any crowding out effect and to ensure larger capital formation by the private productive real sector.”
In his own reaction, Victor Chiazor, analysts and Head of Research and Investment at Fidelity Securities Limited, said: “The decline recorded in the listing of FGN Bond on the Exchange, is as a result of the fact that the FGN Bond were not listed.
We know that previous government borrowing was high. Excessive borrowing by the previous government at the expense of the private sector which is the engine room of the economy brings to question the soundness of their economic strategy.
“The careless use of debt as a financing tool is fraught with calamitous dangers. Even more disheartening is when the debts are principally used to finance consumption or to unwisely finance few secondary infrastructure (Roads and Rail).
“These will neither enhance the productive momentum of Nigeria’s light industries nor make the economy self reliant.
“The disorderly growth of the economy the last administration pursued can only mislead the country into an abyss if public borrowing is not curtailed to lower cost of funds so that production will be competitive.”
Source: Vanguard