How to Invest in Eurobonds in Nigeria
Share
Tweet
0
Shares
Nigeria’s Eurobond remains one of the most profitable in the
investment world. Most Nigerian investors do not invest in this
instrument due to ignorance or lack of awareness of its profitability.
The Federal Government of Nigeria and many other corporate
organizations subscribe a lot to Eurobonds and issue it often. This
should make you see that there is something to this investment tool.
Many have taken advantage of this relatively high yield environment in
Nigeria and you can also be one of them. If you are not yet
participating in the Eurobonds in Nigeria and are wondering what
exactly Eurobonds are and how you can be a part of Eurobond
investments, you are in the right place. This article provides you
with information on all you need to know about Eurobond investments.
(adsbygoogle = window.adsbygoogle || []).push({});
How to Invest in Eurobonds in Nigeria
What are Eurobonds
Eurobonds are bonds that are denominated in another currency other
than that of the issuer. For example, when the Federal government
issues a Eurobond like that of the Nigeria Eurobonds and Diaspora bond
of 6.75% US$500 million January 2021. This is a bond issued by the
Federal Government of Nigeria in Nigeria but denominated in the United
States Dollars.
(adsbygoogle = window.adsbygoogle || []).push({});
Those who obtain this bond, buy them in dollars, also the interest and
principal repayment are conducted in US Dollars.
Please note that Eurobonds are not necessarily denominated in Euros as
the name implies as you can see from the FGN Eurobond mentioned above.
Bonds denominated in US dollars are also referred to as Eurobonds. In
some places, you will also find that bonds denominated in US Dollars
are referred to as Eurodollar bonds, while those denominated in
Japanese Yen are known as Euroyen bonds. However, the term
‘Eurobonds’ have come to be generally associated with bonds
denominated in currencies other than that of the issuer.
How to Invest in Eurobonds
The process of investing in Eurobonds in Nigeria does not differ from
that of investing in local bonds. Both, FGN bonds and also, FGN
Eurobonds can be bought both at the primary market at the initial
offer level or at the secondary market for an existing bond. All that
is needed is for the investor to complete the tender for Federal
Government of Nigeria Bonds’ form, submit the tender through any of
the authorised dealers and make the required payment when the bid is
successful.
(adsbygoogle = window.adsbygoogle || []).push({});
Eurobond secondary market buy
An investor can still participate in Eurobonds even if he or she did
not participate when the bonds (either government or corporates) was
originally issued in the primary market. Such a person can participate
in the secondary market through the Nigerian Stock
Exchange or OTC market
The OTC which means over-the-counter (OTC) market is a decentralized
market in which market participants trade stocks, commodities,
currencies or other investment instruments directly between two
parties and without the involvements or supervision of a central
exchange or broker. Over-the-counter markets are conducted
electronically and not via physical locations.
Government or Corporate Eurobonds
Eurobonds come as both government and corporate bonds. As an investor,
you can choose whether you want to buy government Eurobonds or Seplat
Eurobond (corporate). Corporate issued Eurobonds may offer higher
interest than government-issued Eurobonds. However, they also offer
higher risk. Just like local bonds Eurobonds also have different risks
characteristics, Different investors also have a different tolerance
level for risks as well as differing risk appetite. If you want to
start to invest in Eurobonds, ensure you weigh the risk
characteristics of the Eurobonds and set it against the interest rate,
to know if it is worth it. Most Eurobonds come with credit ratings,
which serve as a measure of their quality and risk profile. For
example, an AA rated bond is of higher quality than A-rated bond. An
AA rated bond means it has a low chance of default and therefore
offers more security and stability. An AA rated bond, therefore, pays
lower interest than an A-rated bond.
How to obtain an FG Eurobond
Usually, when bond issues open in primary markets, the relevant
document contains a list of the banks or brokers that have been
authorized to sell the bonds. In Nigeria, FGN issued bonds are
purchased via Primary Dealer Market Makers (PDMMs). These are banks
appointed by the Debt Management Office of Nigeria, (DMO), to act as
authorised dealers of FGN bonds. In order to know which of the banks
to invest in, consider the time of turnover of yield, responsiveness
to clients, their client service excellence, and so on. The banks or
brokers may differ in their commissions and other charges as well.
(adsbygoogle = window.adsbygoogle || []).push({});
After you have selected the broker or bank you want to use, complete
the required purchase order forms and instructions on what account to
debit for the purchase.
When all these have been done, wait, and get a confirmation from your
bank/broker that your purchase has been successful.
Investing in Corporate Eurobonds via Mutual funds.
There are various companies that offer you the opportunity of
investing in Eurobonds via mutual funds. For example:
FBN Nigeria Eurobond (USD) Fund
The FBN Nigeria Eurobond (USD) Fund provides investors with capital
appreciation by investing in Eurobonds issued by the Nigerian
government and other reputable corporate institutions. The FBN Nigeria
Eurobond (USD) Fund is Nigeria’s first US dollar-denominated mutual
fund which allows you to earn an income in dollars.
Benefits:The minimum amount you can invest is $2,500 (for individuals)
and $100,000 (institutions)
You earn higher interest rates than a normal US dollar domiciliary bank account
Stanbic IBTC Dollar Fund
This is an open-ended scheme that invests in US dollar-denominated
securities issued by the Securities and Exchange Commission registered
Nigerian entities such as corporate and sovereign Eurobonds and mutual
funds. The Fund allows investors to have a chance at
dollar-denominated securities which ordinarily would be inaccessible
to them because of the minimum amount required to make such
investments.
(adsbygoogle = window.adsbygoogle || []).push({});
Other corporate Eurobonds Mutual funds are:
United Capital Asset Management
ARM Eurobond Fund
Investnow.ng
Eurobonds are a great way of investing so one can achieve a higher
yield on investments. The major disadvantage of investing in Eurobonds
is with foreign exchange risk.
(adsbygoogle = window.adsbygoogle || []).push({});
(adsbygoogle = window.adsbygoogle || []).push({});
jQuery(document).ready(function( $) { $.post(
'https://nigerianfinder.com/wp-admin/admin-ajax.php', {action:
'mts_view_count', id: '290346'}); });
Share
Tweet
0
Shares
Tweet
0
Shares
Nigeria’s Eurobond remains one of the most profitable in the
investment world. Most Nigerian investors do not invest in this
instrument due to ignorance or lack of awareness of its profitability.
The Federal Government of Nigeria and many other corporate
organizations subscribe a lot to Eurobonds and issue it often. This
should make you see that there is something to this investment tool.
Many have taken advantage of this relatively high yield environment in
Nigeria and you can also be one of them. If you are not yet
participating in the Eurobonds in Nigeria and are wondering what
exactly Eurobonds are and how you can be a part of Eurobond
investments, you are in the right place. This article provides you
with information on all you need to know about Eurobond investments.
(adsbygoogle = window.adsbygoogle || []).push({});
How to Invest in Eurobonds in Nigeria
What are Eurobonds
Eurobonds are bonds that are denominated in another currency other
than that of the issuer. For example, when the Federal government
issues a Eurobond like that of the Nigeria Eurobonds and Diaspora bond
of 6.75% US$500 million January 2021. This is a bond issued by the
Federal Government of Nigeria in Nigeria but denominated in the United
States Dollars.
(adsbygoogle = window.adsbygoogle || []).push({});
Those who obtain this bond, buy them in dollars, also the interest and
principal repayment are conducted in US Dollars.
Please note that Eurobonds are not necessarily denominated in Euros as
the name implies as you can see from the FGN Eurobond mentioned above.
Bonds denominated in US dollars are also referred to as Eurobonds. In
some places, you will also find that bonds denominated in US Dollars
are referred to as Eurodollar bonds, while those denominated in
Japanese Yen are known as Euroyen bonds. However, the term
‘Eurobonds’ have come to be generally associated with bonds
denominated in currencies other than that of the issuer.
How to Invest in Eurobonds
The process of investing in Eurobonds in Nigeria does not differ from
that of investing in local bonds. Both, FGN bonds and also, FGN
Eurobonds can be bought both at the primary market at the initial
offer level or at the secondary market for an existing bond. All that
is needed is for the investor to complete the tender for Federal
Government of Nigeria Bonds’ form, submit the tender through any of
the authorised dealers and make the required payment when the bid is
successful.
(adsbygoogle = window.adsbygoogle || []).push({});
Eurobond secondary market buy
An investor can still participate in Eurobonds even if he or she did
not participate when the bonds (either government or corporates) was
originally issued in the primary market. Such a person can participate
in the secondary market through the Nigerian Stock
Exchange or OTC market
The OTC which means over-the-counter (OTC) market is a decentralized
market in which market participants trade stocks, commodities,
currencies or other investment instruments directly between two
parties and without the involvements or supervision of a central
exchange or broker. Over-the-counter markets are conducted
electronically and not via physical locations.
Government or Corporate Eurobonds
Eurobonds come as both government and corporate bonds. As an investor,
you can choose whether you want to buy government Eurobonds or Seplat
Eurobond (corporate). Corporate issued Eurobonds may offer higher
interest than government-issued Eurobonds. However, they also offer
higher risk. Just like local bonds Eurobonds also have different risks
characteristics, Different investors also have a different tolerance
level for risks as well as differing risk appetite. If you want to
start to invest in Eurobonds, ensure you weigh the risk
characteristics of the Eurobonds and set it against the interest rate,
to know if it is worth it. Most Eurobonds come with credit ratings,
which serve as a measure of their quality and risk profile. For
example, an AA rated bond is of higher quality than A-rated bond. An
AA rated bond means it has a low chance of default and therefore
offers more security and stability. An AA rated bond, therefore, pays
lower interest than an A-rated bond.
How to obtain an FG Eurobond
Usually, when bond issues open in primary markets, the relevant
document contains a list of the banks or brokers that have been
authorized to sell the bonds. In Nigeria, FGN issued bonds are
purchased via Primary Dealer Market Makers (PDMMs). These are banks
appointed by the Debt Management Office of Nigeria, (DMO), to act as
authorised dealers of FGN bonds. In order to know which of the banks
to invest in, consider the time of turnover of yield, responsiveness
to clients, their client service excellence, and so on. The banks or
brokers may differ in their commissions and other charges as well.
(adsbygoogle = window.adsbygoogle || []).push({});
After you have selected the broker or bank you want to use, complete
the required purchase order forms and instructions on what account to
debit for the purchase.
When all these have been done, wait, and get a confirmation from your
bank/broker that your purchase has been successful.
Investing in Corporate Eurobonds via Mutual funds.
There are various companies that offer you the opportunity of
investing in Eurobonds via mutual funds. For example:
FBN Nigeria Eurobond (USD) Fund
The FBN Nigeria Eurobond (USD) Fund provides investors with capital
appreciation by investing in Eurobonds issued by the Nigerian
government and other reputable corporate institutions. The FBN Nigeria
Eurobond (USD) Fund is Nigeria’s first US dollar-denominated mutual
fund which allows you to earn an income in dollars.
Benefits:The minimum amount you can invest is $2,500 (for individuals)
and $100,000 (institutions)
You earn higher interest rates than a normal US dollar domiciliary bank account
Stanbic IBTC Dollar Fund
This is an open-ended scheme that invests in US dollar-denominated
securities issued by the Securities and Exchange Commission registered
Nigerian entities such as corporate and sovereign Eurobonds and mutual
funds. The Fund allows investors to have a chance at
dollar-denominated securities which ordinarily would be inaccessible
to them because of the minimum amount required to make such
investments.
(adsbygoogle = window.adsbygoogle || []).push({});
Other corporate Eurobonds Mutual funds are:
United Capital Asset Management
ARM Eurobond Fund
Investnow.ng
Eurobonds are a great way of investing so one can achieve a higher
yield on investments. The major disadvantage of investing in Eurobonds
is with foreign exchange risk.
(adsbygoogle = window.adsbygoogle || []).push({});
(adsbygoogle = window.adsbygoogle || []).push({});
jQuery(document).ready(function( $) { $.post(
'https://nigerianfinder.com/wp-admin/admin-ajax.php', {action:
'mts_view_count', id: '290346'}); });
Share
Tweet
0
Shares
Comments
Post a Comment