By Peter Egwuatu
There are indications that investors’ interest in the FGN Savings Bond is waning as the value of subscription fell by 16.4 percent to N6.283 billion in the half year ended June 30, 2023, HI’23. The figure was N7.518 billion in the same period of 2022, H1’22.
The latest Debt Management Office, DMO, data obtained by Vanguard also shows that allotments of the bond declined by 18.5 percent to 3,547 in H1’23 as against 4,354 in HI’22.
Capital market operators and stakeholders have attributed the negative outlook to low purchasing power caused by the rising inflation that has hit all time high of 22.79 % in July 2023.
Vanguard’s findings reveal that the value of transactions have been fluctuating Month on Month, M-o-M.
In February it increased by 138.5% to N1.271 billion from N533.03 million in January, while in March the value went down by 20.5 % to N1.011 billion.
In April the value went up by 6.7 % to N1.079 billion while in May it further went up by 8.4 % to N1.169 billion. But in June the value dropped by 16.4% to N6.283 billion.
Commenting, analyst and Vice Executive Chairman, HIGHCAP Securities Limited, David Adonri said: “Concerning the decline in subscription for FGN Savings Bond, the dwindling disposable income of retail investors who are target of the product may be responsible. Yield on Savings Bond is also not competitive when compared to orthodox FGN Bonds or SUKUK.”
In his own reaction, analyst and Head of Research and Investment at Fidelity Securities Limited, Victor Chiazor, said: “The reduced investors’ interest in FGN Savings Bond does not come as a surprise to many given the increased volatility being experienced in the equities market.
“Also, the low disposable income of investors is another major factor that could also be responsible for the low appetite as there are other viable options like equities.
“Recall the massive flow of investment into the FGN Savings Bond when the equities market was bearish and activities around the market were flat. “However, with this season we have seen a higher level of volatility in the equities market and if this momentum is sustained we will continue to see reduced investment in the FGN savings bond for the rest of the year, except the government significantly increases the interest rate to levels that becomes more attractive to the market.”
Reacting as well, analyst and Managing Director, APT Securities said: “The good performance of the equities market could have led to the low level of investment in the FGN Savings Bond as more investors divested to stocks. Also, the rise in inflation to 22% makes investment into FGN Savings Bond with negative returns reduced. With upsurge of the stock market there is likely hope of further decline in FGN Savings Bond.”
Source: Vanguard
