The Nigerian Stock Exchange (NSE), yesterday, reduced transaction charges at the Over-The-Counter bond market to encourage divestments of portfolios in the sub-sector.
The development may have coincided with plans by some investors to seek alternative routes to getting stable and better yields, after suffering from price losses arising from illiquidity and confidence crisis in the equities sector.
Specifically, First Bank of Nigeria (FBN) Plc, Guaranty Trust Bank Plc, Diamond Bank Plc, Oando Plc, Nigerian Aviation Handling Company Plc and United Bank for Africa Plc had last year expressed intentions to each raise N500 billion, N200 billion, N200 billion, N200 billion, N5 billion and N500 billion respectively from corporate bond market.
Besides, investments in bonds within 2009 rose by about 78 per cent from N10.2 trillion in 2008 to N18.2 trillion last year. Going by the release made available to The Guardian by the NSE yesterday, annual listing cost of new issues of Federal Government bonds in the primary market will attract a cost fixed at N20million irrespective of the number of bonds listed by the Debt Management Office of the Federal Government.
For transactions that will be done on daily basis at the secondary market, the NSE is charging N1 per million of the underlying traded (charged on sell side only), while the Central Securities Clearing System (CSCS) charges N1 per million of the underlying traded (charged on both buy & sell sides). For the FGN bonds, stockbrokers' charge N5 per million of the underlying traded (charged on both buy & sell sides).
On the other hand, yearly listing fees of new issues of State Government/Local Government (Municipal) and Corporate Bonds in the primary market remains on a sliding scale with no changes, ranging from a minimum of N189,000 for issues less than N50million, to a maximum of N4.2m for issues more than N200 billion. For its application levy, the NSE is charging 0.15 per cent for issues up to N2 billion and 0.1 per cent for issues above N2 billion, while the CSCS will now charge 0.0125 per cent on new issues.
Furthermore, transactions at the secondary market will now attract N5 per million of the underlying traded (charged on sell side only), while both the CSCS and stockbrokers will charge N10 per million of the underlying traded (charged on both buy & sell sides). Before now, the fees charged on traded bonds vary among the stakeholders between 0.47 per cent of consideration to about 1.57 per cent.
Reacting to the news, the Managing Director of Dependable Securities Limited, Mr Chimenyim Anyanwu said that the reduction in the fees charged on bonds by the Exchange would enhance activities in the bond market, because it would attract more companies to the market. He noted that much activities are not going on in the bond market, adding that thee effect is to encourage investors to diversify their portfolio.
"The effect is to deepen, diversify portfolio and to encourage investors and new companies to come and invest in the bond market", he said. Another Stockbroker with Pivot Trust and Investment limited, Mr Sunny Agoh said the reduction would encourage more states to come to the market to float bonds.
He noted that when the fees are on the high side, it scares investors away from the market, adding that this would enhance market growth. "This would encourage states o come and other foreign investors. It is what they get from bonds that make up their budget, but in Nigeria, we depend more on oil. When the charges are high, it drives investors away from the market so this price review will encourage them and grow the market", he added.