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Prevailing Rates Regime Unfriendly For Corporate Bonds Issuance – Belo Osagie

By on January 27, 2013

Managing Director of FSDH Merchant Bank Limited, Mr. Rilwan Belo-Osagie has remarked that the high interest rate regime make the issuance of corporate bonds unattractive for firms.

The seasoned banker disclosed this to journalists at the unveliling of the recently licensed merchant bank in Lagos.

He said, “Initially there were few companies that issued corporate bonds but most companies stopped and the reason they stopped was that the interest rates are pretty high and then that discouraged people from doing corporate bonds. I believe when rates are low more corporations would raise bonds.”

He also said the illiquid nature of the corporate bond market was another factor that made it unfriendly to finance chiefs.

“If we are able to trade on corporate bonds that would encourage more people to invest in corporate bonds. At the moment the corporate bond market is very illiquid, but we hope that with time they would become more liquid and would be traded just as government bonds are traded,” he stated.

Speaking on the new license to operate as a merchant bank and the strategic advantages they could now offer their clients, Osagie said, “As a merchant bank we can offer our clients a broader range of services, we are more relevant to our clients. As discount house we couldn’t do any foreign exchange business, we couldn’t do trade in foreign currency securities, we couldn’t also offer term loans and give advances, those are basically the things that we can do now that we couldn’t do as a discount house.”

“We will strictly remain a merchant bank; that is our business. Going into merchant banking was appropriate for us because we believe that the experience that we have gathered over the years as a discount house would be an advantage to us as a merchant bank and not a commercial bank.”