Tuesday, August 17, 2021/ 10:00AM / Ottoabasi
Abasiekong for WebTV / Header Image Credit: WebTV
For the remaining half of the year, 2021 bond yields will trade between 12% and 13%, as activities in the Eurobond market boosts fixed-income market liquidity.
Mr Oladipo Ajayi disclosed this while discussing the domestic debt market and Nigeria's economic sustainability.
According to him, the rates will trade sideways as the appetite for the fixed income market in August 2021 should be steady as investors watch activities in the debt capital market.
He said the August 2021 expected coupon payment of N60bn, September 2021 expected coupon payment of N300bn and another N200bn coupon payment in October 2021 should boost liquidity in the market.
On the planned Eurobond issuance, he called on the Nigerian government to take proactive steps in leveraging the global debt market. He noted that this was necessary due to the rising tide of inflation in the United States and a possible Federal Reserve rate hike.
Speaking further on global debt market opportunities, Ajayi highlighted that Nigeria could issue a Eurobond of $3bn, stimulating economic activities in the country.
He called on the monetary policy authorities to reform the foreign exchange market to incentivize foreign portfolio investments (FPIs) and foreign direct investments (FDIs).
For the fixed income market outlook, Oladipo Ajayi believed that the monetary policy approach would be silent and dovish for the remainder of the year 2021.
Providing his perspective on the recent issues around the International Development Association, IDA the analyst said the government's decision to borrow from the market was reasonable enough because the tenure is long. He added that the moratorium period of 7-10 years was understandable as the loan cost was the cheapest for raising funds.
One area of concern for him was the cost of servicing debt. He urged the fiscal policy authorities to address frontally through the deepening of the nation's revenue-generating capacity.
He noted that borrowing $11.7bn from the local market by the government would crowd out the private sector from the debt market, reducing debt diversity.
The Head of the Fixed Income Desk, Chapel Hill Denham, acknowledged the role of FMDQ in developing a vibrant debt market that has attracted corporates and urged growth companies and fintech firms to access the market.
Looking at the Debt Management Office (DMO) N150bn auction this week, he said it would experience a good response from the market.