Your Pension Fund Is About To Fund Another N120 Billion FG Borrowing Spree

The Debt Management Office (DMO) has announced another bond issuance of about N120 billion for the month of July 2016. The DMO’s release confirmed an issuance of N40 billion each in bonds maturing in 2021, 2026 and 20136 respectively. The government had in its 2016 budget presentation revealed that it planned to borrow about N1.6trillion […]

The government had in its 2016 budget presentation revealed that it planned to borrow about N1.6trillion this year with about half of that money funded from the local bond market. With JP Morgan yanking Nigeria off its emerging market bond index last year, the government will have to rely on local buyers to help fund its borrowing spree.

One of the government’s major buyers are our pension funds, who according to the DMO purchased about 34% of total bond issuance in Nigeria. The DMO confirmed this in its famous response to the yanking off of Nigerian from the emerging market bond index.

[alert-note]The increased participation of non-banks in the FGN Bond Markets. The following statistics are indicative of the level of diversification that has been achieved in the investor base: The share of Allotment of FGN Bonds to Pension Funds at the Auctions grew from 20.28% in 2010 to 33.35% in 2014. The share of Non-Bank Financial Institutions in Allotments at the Auctions rose from 7.08% in 2010 to 20.93% in 2014. DMO[/alert-note]

Unbeknownst to a For a lot of Nigerians who are pension fund contributors, their pension funds are mostly invested in FGN bonds and treasury bills due to their attractive interest rates. Many believe their pension funds are invested in real estate or more preferred options rather than being lent to the government.

Whilst buying government bonds is a great investment due to its higher yields but lower risk, pension fund contributors if left with the decision to buy bonds will probably abstain when they discover that part of the cash is stolen or mismanaged by corrupt politicians.

Comments 5

Xanthos1

July 12, 2016 · 8:44 am

I think investment in government securities is considered most risk free than the suggested “real estate and other options” the higher yields makes it more attractive…the issue of stolen cash or mismanagement is not a factor investment analysis…

Anodebenze

July 12, 2016 · 10:43 am

Let me tell the gospel truth of an African man.NIGERIA IS ALREADY RICH AND POWERFUL,BUT THEY DO NOT KNOW IT.WHAT THE HELL WILL A NIGERIAN CONTROLLED WEBSITE WITH IT’S A NIGERIAN,PUBLISHING AND EDITORIAL CONTROL IS QUOATING A FOREIGN ENTITY.IS THIS BEST THIS COMPAN/YBANK CAN DO ?
WHAT THE HELL IS J.P MORGAN RIGHT OR AUDACITY TO TELL US AFRICAN OR NIGERIAN TO TELL US OR PATRONISE US ON WHAT IS RIGHT OR WRONG IN OUR PLANET.
There is what is omosis of the human spirit,when you borrow idea,or article which did not come from your spirit or your Africa spirit,your originality(,your union with your creator.everything in our planet is subjecitive,there is no absolute truth in our planet,.only the almighty God is absolute.when you borrows a topic in bloonberg,cnn, which does not come original from your soul),you give power to those,who wants to destroy you
In our planet.life can be an illusion but it is not.my advise to my fellow Nigerian,to think,speak through your soul.africa have have suffered,but why should we Africans listen to others,why not we African listens to ourselves.
For us African to think or speaks through our soul,we should descipline our body and our mind, to clear doubt and delusion before we act

Adeleke Ayoola

July 12, 2016 · 2:00 pm

I recently discovered this site and i find it highly informative about the Nigerian economy and investment generally. Kudos and keep up the good works.