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NSE to reduce transaction charges on corporate bond

By on February 11, 2013

The Nigerian Stock Exchange, NSE, may review transaction charges on State/ Local Governments/Corporate bonds following complaints from stakeholders in the capital market.

The NSE had from February 1, when retail bond trading commenced, set N1 charges on buying or selling of securities worth N1 million on Federal Government bond and N5 charges on State/ Local Governments/Corporate bonds of the same volume.

Market operators told our correspondent that with the Federal Government bond currently enjoying reasonable patronage, even at the OTC market, while state bonds and corporate bonds were not, there was need for lower transaction charges to attract liquidity to these bonds.

A market operator with Vetiva Securities Limited, Mr. Biodun Adeniran, pointed out that the Federal Government bonds were enjoying investors’ patronage but the state and corporate bonds were not.

He said: “Why the different in the transaction charges? To stimulate the bonds (state/local governments and corporate), there is need to take another look at the transaction charges and reduce that of the state or corporate.”

According to the Managing Director of Keystone Investment Limited, Mr. Sunny Obazea, one of the ways to encourage investors is to ensure that those who buy state/corporate bonds pay lower fee than the Federal Government bonds.

He said: “We have to develop people’s interest in state/corporate bonds.

“For a state to issue a bond, it has to write a letter to the Accountant- General of the Federation on irrevocable standing payment order. But we discovered that there are some state governments that manipulate the letter. So, the risk is higher.”

In his reaction, Head of Product Management at the NSE, Mr. Dipo Omotosho, told our correspondent that the transaction fee structure was arrived at by all stakeholders, saying that it was not a unilateral decision by the Exchange.

“However, it is subject to review in the near future. Besides, the fees are minimal compared to the volume of transactions,” he said.

Meanwhile, the Federal Government will offer N105 billion bond for subscription by way of public auction on Wednesday.

The government is offering N35 billion worth of five-year bond maturing in April 2017 with an annual coupon rate of 15.10 per cent and N35 billion worth of seven-year bond maturing in June 2019 with an annual coupon rate of 16 per cent.

According to the notice pasted on the Debt Management Office, DMO, website, the government is also offering N20 billion worth of 10-year bond maturing in January 2022 with an annual coupon rate of 16.39 per cent and N15 billion worth of 20- year bond maturing in July 2030 with an annual coupon rate of 10 per cent.
[National Mirror]