Theanalyst Logo
Market Date: 26-03-2014   |    Index: 37820.22 0.24%   |    Home | Sign in | Register Now  
Frequently Asked Questions by Retail Investors about Bonds

1. Q. What are securities?
A. Securities in finance are an evidence of an interest in any financial asset which includes stocks, bonds, debentures issued by a corporate, agencies and the government.

2. Q. Why does the Nigerian Government issue debt instruments?
A. The Nigerian Government issues both short term and long term financial instruments to finance the Budget deficit. The yearly budget consists of both Revenues and expenditures, whenever the expenditures surpass the revenues; the government borrows from investors by issuing either bonds or treasury bills.

3. Q. Who else besides the Nigerian government can issue Fixed Income Instruments?
A. Fixed Income securities can be issued by almost any legal entity like central and state governments, public institutions, Banks and financial institutions and any other corporate body.

4. Q. What are the advantages of investing in Government Securities?
A. There are numerous advantages in investing in Nigerian government securities which includes:
I. Greater safety and lower volatility when compared with other financial instruments
II. Tax exemption for interest earned on Government securities
III. Adequate liquidity, that is easy entry and exit of the government fixed income securities market (One can buy and sell at any time of choice)

5. Q. What is the minimum amount investible in the FGN Bond Market?
A. The minimum amount investible in the FGN Bond market is N10,000.00 (ten thousand naira)

6. Q. Is there a Nigerian government Bond that pays interest monthly instead of semi annually?
A. Interest on government fixed income securities are either paid at maturity or semi annually depending which of the government securities we are making reference to. Treasury bills which usually have a maturity of less than 1 year are paid at maturity while for Bonds, interest on the outstanding principal is paid semi annually.

7. Q. Who are the main investors in government securities?
A. There are no major restrictions on potential investors for government securities. Investors normally include; Bank and financial Institutions, Pension Fund Managers, Foreign investors, Corporates and individuals

8. Q. What are coupon payments?
A. Interests received by holders or investors in government securities are also known as coupons. The rate usually used to determine the coupon amounts to be received is known as the coupon rate.

9. Q. How the price is determined in the debt markets?
A. The price of a bond in the markets is determined by the forces of demand and supply, as is the case in any market. However, changes in other factors will cause the price of a debt instrument to fluctuate such as; Economic conditions, Future interest rate expectation and the credit quality of the issuer.

10. Q. How is Yield related to the price?
A. Yields and Bond Prices are inversely related. So a rise in price will decrease the yield and a fall in the bond price will increase the yield.

11. Q. Who regulates the Fixed Income Markets?
A. The issuance and coordination of the fixed income markets is conducted by the Debt Management Office for Bonds while the Central Bank of Nigeria handles the issuance of Treasury Bills.

12. Q. What is the issuance process of Government securities?
A. The Issuance of Bonds and Treasury Bills are conducted via the auction process where potential investors subscribe for these instruments at varying prices /yields. After collation of bids, allotment is made to investors starting from the highest prices/lowest yield up on till the lowest price/highest yield. The lowest price/highest where the allotment stops is called the marginal/stop rate.

13. Q. What are the key components of fixed income securities?
A. The key components to be considered when investing in fixed income securities are; Credit quality, yield, and maturity.

14. Q. Why is there a difference between coupon rate and current yield?
A. The difference between coupon rate and current yield arises because the market price of a security might be different from the face value (redemption value) of the security. Since coupon payments is fixed and are calculated on the face value

15. Q. How often are Government Bonds issued at the Primary markets?
A. The Debt Management Office issues government bonds monthly through the auction process


About us
T & C of Use
Our Policies
Advertise with Us
Subscribe / Unsubscribe
Site Map
News Feed - RSS
Contact Us
Discussion Forum
Market News & Reports

Daily Market Reports
Stock Picks
Sentiments Analysis
Investors Newsbeat
Corporate Actions
Capital Market Updates
Offers & Rights
Analysis & Opinion
Bonds Update & Outlook
The Economy
The Regulator
CBN Governor 2014
Market Data

NSE Live
Global Markets
Afrcan Markets
Investor Relations

Investor Relations Central
Share Support Services
Online Reputation Audit
Management Information
Financials & Analysis
Fundamental Analysis / Equity Reports
Research & Reports
Technical Analysis/ Charts
Corporate Earnings
Our Services

Research & Market Intelligence
Analyst Services
Offers & Rights Support Services
IR Service Support
Alert & Subscription Service
Market Recommendations
Capital Market Training
Events Coverage
File a Complaint

Investor Tools

Todays Market Action
Online Trading & Execution
Explore Technicals
Valuation Statistics
Peer Comparison
Performance Comparison
Stock Recommendation Tracker
Results Screener
Market Directory
Discussion Forum

The Analyst is a market service provided by Proshare Nigeria Limited.
Registered Office: The Upper Room, Plot 1, Lekan Asuni Close, Off Toyin Omotosho Street, Omole Phase II, Isheri LGA, P.O. Box 18782, Ikeja, Lagos, Nigeria. Telephone +234 1 762 4131 Registered in Nigeria.