The value of Federal Government of Nigeria (FGN) Bonds listed on the Nigerian Exchange Limited (NGX) witnessed a significant decline of 99.9% in the eight-month period ending on August 31, 2023.
The figures dropped from N1.6 trillion recorded during the corresponding period in 2022 to a mere N148.2 billion this year.
Data retrieved from NGX reveals that the listings of Bonds this year primarily consisted of the FGN Savings Bond and Sukuk, whereas the previous year included both Federal Government Bonds and Savings Bonds.
Reduced FGN bond listings raise concerns
Notably, the FGN Sukuk held the highest value during the review period, amounting to N130 billion.
Financial analysts suggest that the reduced listing of FGN Bonds this year may indicate that the Federal Government borrowed less from the primary market compared to the same period in 2022.
This development could potentially impact liquidity in the secondary market.
David Adonri, an analyst and Vice Executive Chairman of HighCap Securities Limited, highlighted the risks associated with increased borrowing by the government, including the potential for sovereign default and negative economic consequences.
He also expressed concern that excessive government borrowing may crowd out the productive real sector, hindering wealth creation and job generation.
Tajudeen Olayinka, an Investment Banker and Stockbroker, explained that a surge in debt listings typically leads to increased liquidity and trading activities in the market.
However, the decline observed in the eight-month period could be attributed to higher yields offered by competing financial instruments.
Reduced government borrowing in the primary market may have contributed to the drop in FGN Bond listings on the secondary market.