History and Prospect of the Nigeria Government Bonds Market.
ABSTRACT
The study focuses on the development of government bond market in Nigeria. It explores the history, structure, performance and key issues related to the development of bond market with the broader context of domestic, regional and global bond market development.
The Nigeria government bond market provides valuable lessons for other emerging market economies also seeking to build bond market.
The sophistication of the local bond market is not enough to make it appealing to foreign borrowers.
Market development demands an enabling market infrastructure and a background of macro-economic stability, diversified market participants, an appropriate regulatory and supervision environment.
TABLE OF CONTENTS
Page
Title Page…i
Certification………….ii
Approval Page…iii
Dedication………..iv
Acknowledgement..v
Abstract…………..vi
Table Of Contents vii-x
List of Tables..xi
List of Figures…xii
CHAPTER ONE: INTRODUCTION
1.1. Background of Study………1-6
1.2. Objective of the Study…..6-7
1.3. Scope of the Study……..7
1.4. Limitations of the Study…….7
1.5. Significance of the Study……..7-8
CHAPTER TWO: LITERATURE REVIEW
2.1. Introduction…10
2.2. The Development of Bond Markets in Emerging Markets….10
2.2.1. Introduction…10
2.2.2. Rationale for Developing a Domestic Bond Market..11
2.2.2.1.Introduction ……11
2.2.2.2.An Alternative Source of Domestic Debt Finance 11-12
2.2.2.3.Lower Cost of Capital…….12-13
2.2.2.4.Broadening of Capital Markets……..13
2.2.2.5.Efficient Pricing of Credit Risks…..13-14
2.2.2.6.Promotion of Financial Stability…….14-15
2.2.3. Critical Success Factors……15
2.2.3.1.Introduction…………….15-17
2.2.3.2.The Political Situation………..17
2.2.3.3.The Macro Economic Situation……..17-18
2.2.3.4.Supervision and Regulation……18-20
2.2.4. Other Bonds Markets………20
2.2.4.1.Introduction………20-21
2.2.4.2.Asia……….21-22
2.2.4.3.Europe……….22-24
2.2.4.4.The United States…………24-26
2.2.4.5.African Bond Markets………..26
2.3. Summary…..26
CHAPTER THREE: RESEARCH METHODOLOGY
3.1. Research Design…….29
3.2. Nature and Sources of Data….29
3.3. Population and Sample Size….29-30
3.4. Techniques for Analysis……30
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1. Introduction…..32
4.2. Size and Performance of the Nigeria Bond Market…33-37
4.3. Listing…………38
4.4. Enabling Legislation…38-39
4.5. Basic Framework to Analyze and Evaluate the Nigeria Bond Market………39-40
4.5.1. Nigeria Bond Market Analysis and Interpretation……41
4.5.2. Stable Macro Economic Policies…….41-43
4.5.3. Stable Political Environment……43
4.5.4. Robust Legal Environment ………..43
4.5.5. Market Infrastructure……..43-44
4.5.6. Diversified Market Participants………44
4.5.6.1.Issuers..45
4.5.6.2.Investors……….45-47
4.6. Conclusion……………47
CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS
5.1. Summary of Conclusions………..49-50
5.2. Lessons and Challenges for the Rest of Africa……..51-52
5.3. Recommendations……..52
Bibliography…………..53-55
INTRODUCTION
1.1 Background of Study
The current administration’s commitment to rebuilding Nigeria’s dilapidated infrastructure as a catalyst for economic development has brought to the fore the need for a functional bond market given the developmental needs of the economy.
The recent period of economy growth witnessed in Nigeria can only be sustained with continuous investment in infrastructure and the expansion of industrial output.
The dearth of adequate financing has been identified as one key factor inhabiting this much needed investment in critical infrastructure such as down and mid stream petroleum distribution, telecommunication and transportation.
Additionally, substantial long term financing would be required to rejuvenate Nigeria ailing power sector, it comatose refineries and the provision of socio-economic development in education and healthcare.
Moreover, recent effort by the FGN to diversify the economic and make it more market driven means that funds would also be needed to expand existing facilities to meet the increased demand expected of a more efficient economy over the long term.
The Bond Market remains a fundamental financial market as risk pricing and investment valuation models rely on its data. While a functional domestic bond market is necessary for capital investment, monetary authorities also use bonds to define the yield curve and to ensure stability of short-term rates.
An active sovereign prevents the economy from overheating as it allows large temporary overflows from the money market. The Bond Market therefore plays such a vital role in ensuring the health of the economy that the monetary authorities must be concerned with its structure and operation.
Internationally best-practice stipulates the existence of a public debt managing agency. Until 2000, no such agency existed in Nigeria.
Whilst the Federal Debt Management Office (DMO) may have eventually been instituted, debt relief provided a critical spur, and ensured it was provided with sufficient resources to achieve the country’s goal of debt relief.
This meant that a strong, capable debt management agency was created more quickly, and with greater public support, than it otherwise would have been.
BIBLIOGRAPHY
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