It has been >3 months since CBN banned local non-commercial banking investors from participating in it’s OMO bills primary & secondary market operations (except for foreign investors & local commercial banks) which has caused average yield to fall <6% p.a. At the moment, we are seeing strong investors’ resistance to these low yields and we fear the ”MMM” effect will take hold of the savings & investments market in the short-term with a lot of non-licensed fintechs promising very high returns for investments in specific sectors esp. in agriculture.
We continue to recommend FGN Treasury, Savings & Infrastructure (Sukuk/Green) Bonds on the NGSE/FMDQ exchanges as a better & safer alternative fixed income option that can provide local non-commercial banking investors higher yields than FGN T-bills and also similar yields to those obtained in the short-end CBN OMO-bills market on a long-term basis.
N.B: Your fixed e-savings account on the NGSE is actually Your CSCS Account which is directly connected to CBN S4 Platform (for safe-keeping).
The bond market remains bullish since 4Q2019 as rates continue to fall. We will try to execute clients’ purchase/sales order mandates on FGN bonds at near the last e-o-wk (end of week) market rates as shown below:
Bond Tenor (Years) Current Market Yield (%) Q’ty In W/H (=N= in MLN)
2021 1 6.86 100
2022 2 7.54
2023 3 9.06
2024 4 9.46
2025 5 9.73
2026 6 10.00
2027 7 10.39
2028 8 10.76
2029 9 10.82
2030 10 10.88
2034 14 11.13
2036 16 11.15
2037 17 11.03
2049 29 12.32
N.B: A Typical FGN Savings Bond is a ”revolving” 90-day FGN Treasury Bill.
Standard fixed e-savings acct opening starts at min. N10,000 where your CSCS acct acts as your e-custodian & e-savings account within the CBN S4 platform. Under the savings product – Upfront Interest Savings Scheme which starts at min. savings order of N100,000.00 – only FGN bonds with coupon >6% p.a qualify to be allocated to bond clients.
- What is the effective yield of a FGN bond under the upfront interest savings scheme? – it is calculated by deducting the sum of transaction charges and/or upfront funding expenses from the total yield till maturity (excl. compounding opportunity) and divided by the holding period, for example, purchased at ‘par’ NIGTB 14.2% 14-MAR-2024 (FG112024S1) and held for 5-yrs to maturity => estimated effective yield of 12.6% p.a
- What is the current 91-day FGN T-bill PMA rate ? – 3.00% p.a
- What is the current commercial banks av. savings deposit rate according to CBN ? – 3.89% p.a
- What will be the increment to the bond’s effective rate under the upfront interest savings scheme if the quarterly upfront interest(s) were compounded (re-invested) in 12-month TTM FGN bonds with coupon >7% for example? – we estimate an increment of 0.583% p.a on the respective FGN bonds’ effective rate. Thus, compounding is an investment strategy that should never be ignored !!!
- Must i have a CSCS trading acct with TRW Stockbrokers Limited to participate? – YES !!!
ARMF Bond Portfolio has opened a new sub-product called ”collaterized security margin trading” which is accessible only to bond investors under the Upfront Interest Savings Scheme starting from a min. fixed savings of N1MLN @ margin loan rate of 0.0822% per day (pro rata).
Thus, savers can now leverage on their bonds (fixed e-savings) under the upfront interest savings scheme to obtain fresh cash to invest on the NGSE equity market. A N1MLN fixed e-savings will gain access to an equivalent N1MLN margin loan => N2MLN margin account => leverage ratio (asset/equity) of 200% (2:1).
Margin Loan Window: Open
Marginable Equity Securities: AFRIPRUD, UACN, FLOURMILL, UBA, VITAFOAM
ARMF Bond portfolio re-opens its sourcing for funds upto N500MLN (buy-side investors) to be used for the following:
- to finance upfront quarterly interest payments to bond savers under the upfront interest savings scheme;
- to finance collaterized margin loans to bond savers who want to leverage on their bonds (fixed e-savings) under the upfront interest savings scheme in order to obtain fresh cash to invest on the NGSE equity market;
- participation starts from min. N50MLN at a ”negotiated” annual fixed interest rate for a 12-month revolving holding period.
ARMF Bond Portfolio upfront funding & margin loan rate(s) were reduced from 40% p.a to 30% p.a starting 1st January-2020 due to the local falling lending rate environment.
Caution – selling bonds on the secondary bond market before maturity, can either incur capital loss or capital gain !!!!
Should you require further information on how to get the best (and/or highest) annual interest on Your savings, please contact directly:
Contact Person: Ekwueme Mike Anyadibe
E-mail: firstname.lastname@example.org or email@example.com
Skype #ID: respartner
TRW Stockbrokers Limited
Corporate Office: 62/64 Campbell Street (Kajola House)
4th Floor Lagos Island Lagos .