THE NATION WEDNESDAY, JULY 27, 2011
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THE NATION’S
INVESTORS W
With N861b, investors oversubscribe Fed Govt’s debt bonds
ITH N861.11 billion, investors oversubscribed the Federal Government’s debt issues of N396.50 billion in the first half of the year by N464.61 billion, representing an increase of 117 per cent. But the total amount of debt issues and subscription showed a decline in debt issues and investors' interest. The total amount issued represented a decline of 13.80 per cent on N460 billion offered during the comparable period of last year; the subscription level indicated 18.1 per cent drop from the N1.1 trillion staked in the corresponding period last year. The Debt Management Office (DMO) offered short-term three-year and mediumtenor five-year bonds in 2011 as against a mixture of short to medium and long term bonds issued in the comparable period of 2010. The government issued bonds with tenor ranging from three to 10 and 20 years last year. Most of the bonds offered in the first half of this year were the re-opening of earlier issues with the exception of the three-year bond issue floated in March. The issuance time table of DMO indicated that the government plans to raise between N165 billion and N255 billion through the domestic bond market this quarter. Analysts at FSDH Securities said they expected prices to increase while yield decreases with possible increase in the volatility of the bond market, citing an expected increase in foreign participation in the domestic market. Domestic sovereign bond issues have raised about N7 trillion in the past six years as investors' appetite for national debt issues has elongated tenor from initial two years in 2005 to 20 years since 2008. Since the commencement of the Federal Government's regular bond issuance programme in 2005, investors' appetites have always been ahead of government issues. The government bonds were oversubscribed by 133 per cent, 89 per cent, 95 per cent, 64 per cent and 93 per cent in 2005, 2006, 2007, 2008 and 2009. Despite the 55 per cent increase in value of issue, demand for sovereign bonds at the primary market was 111 per cent above issue last year.
By Taofik Salako
Economist and investment adviser, Sterling Capital Sewa Wusu attributed investors' oversubscriptions to the uncertainty in the non-fixed securities market. According to him, these types of instruments preserve capital and yield fixed
amount of interest, which explain why the bond market is currently a veritable haven for investors. "The only alternative investment outlets in the period of rapid selling pressure in the stock market are the fixed income instruments. That is why most investors are fleeing from the capital market to pitch tent in
the bond market,” Wusu said. The government's bond is usually called sovereign bond because it derives its risks and values from the sovereignty of the country. Given the omnibus power of the central government over resources and the almost limitless ways, its debt issues are regarded as almost risk-free, although the economic standing and management of resources may weigh in on the possible values and attractions of the debt issues.
•From left: Head, Agric Banking, Stanbic IBTC Bank, Mr Jacques Taylor, Governor, Central Bank of Nigeria (CBN), Mallam Lamido Sanusi and Managing Director/CEO, Bank of Agriculture, Dr. Mohammed Santuraki, at a conference on transformation of the agricultural landscape organised by the CBN in Abuja.
DN Meyer seeks fresh funds as new investor takes over
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AINT giant DN Meyer is set to recapitalise and reduce reliance on short-term borrowings to brighten its future, its Chairman, Sir Remi Omotosho, has said. Under the recapitalisation plan, fresh funds will be injected into the firm to plug its exposures. Audited report and accounts of DN Meyer at the end of December 31, last year had showed that its current liabilities exceeded its current assets by N880 million in addition to a net loss of N236 million. Omotosho said the company has completed and is ready to sell its Kuje Housing Estate, which would free tied-up capital for reinvestment. He blamed the poor financial position of
By Taofik Salako
the company on mismanagement by past management. According to him, a due diligence conducted on the company after the emergence of the new board and core investors early last year threw up a lot of issues including massive frauds through the sales operations, unexplained debt entries that resulted in bad debts of some N292 million, stock loss provision of about N72 million and sundry weak internal control issues. He noted that initial efforts to recapitalise the company through a rights issue was frustrated by the previous core investors, which constrained the company to depend on internally generated funds given that it had previously accumulated huge bank debts.
Edo raises state bonds on NSE to N249b THE listing of Edo State’s N25 billion bond on the Stock Exchange (NSE) has increased the number and value of state bonds on the secondary market to 11 and N249 billion. The N25 billion 14 per cent Fixed Rate Infrastructure Development Bond 2017 of N1,000 at par was listed last Thursday. However, turnover on the Over-theCounter (OTC) market for the Federal Government bonds stood at 252.72 million units worth N231.78 billion in 1798 deals in contrast to a total of 244.65 million units valued at N217.38 billion ex-
changed in 1,780 deals in the week ended on July 14. The most active bond was the 10 per cent Seventh Federal Government Bond 2030 Series 3 with a traded volume of 71.2 million units valued at N63.50 billion in 641 deals. It was followed by the four per cent 7th Federal Government Bond 2015 Series 2 with a traded volume of 69.9 million units valued at N55.92 billion in 535 deals. Fifteen of the available 29 Federal Government Bonds were traded last week compared with nine in the preceding week.
Omotosho said the new board has settled the debts with the intervention funds of Central Bank of Nigeria (CBN) for the manufacturing sector. The company, he added, has “extensively” dealt with management and internal control issues. "The board and management are now set and are working purposefully to make the company look north in all its performance indices. From 2011, the plan is to make quantumleap sustainable growth and profit in relative terms," Omotosho said. As part of efforts to achieve stable growth, he said, the construction subsidiary of the company would be repositioned with its separate board and management while the company would seek to take advantage of the 10 per cent local content provision in the oil and
Forecasts Q3 NPF MFB T/O N827.31M PBT N198.55M PAT N198.55M COMPANY FORECASTS Q3 Tripple Gee and
gas industry. According to him, the company is forming stronger alliances with major players in the housing sector, especially in the estate development segment to expanding its brand franchise. Audited report and accounts showed that turnover dropped by 37 per cent from N1.9 billion in 2009 to N1.2 billion last year. However, loss before tax reduced from N473.24 million to N231.94 million. Loss after tax also declined from N627.1 million to N236.4 million. Shareholders’ funds reduced from N823.8 million to N587.4 million. Omotosho said the board and management had taken steps to address operating challenges, adding that the impact of such actions would start to manifest with the 2011 results.
company Plc Turnover N166.09m PAT N74.59m
Gross Premium N2.039b PAT N72.93m
CUTIX PLC MUTUAL BENEFITS Turnover N588m PAT N68.75m ASSURANCE PLC Gross Premium N3.750b HONEYWELL FLOUR PAT N889.68m MILLS PLC Turnover N21.214b NIGER INSURANCE PAT N835.646m PLC