Amid uncertainties in the stock market, investors can look forward to reasonable returns if they invest in the Federal Government inflation-linked bonds, OKECHUKWU NNODIM writes.Prospect iveinvestors in the planned Federal Government inflation-linked bonds will be guaranteed higher earnings regardless of the prevailing inflation rate at the maturity of their investments.Our correspondent gathered that plans by the Debt Management Office to introduce inflation-linked bonds next year would curtail the harsh effects of inflation on Nigerias bond market.The DMO had last month said it would introduce the bonds in 2012 in a bid to develop the domestic bond market, adding that it had received the backing of the Minister of Finance, Dr. Ngozi Okonjo-Iweala, to carry on with the initiative.Experts in the financial sector said those who would invest in the bonds had nothing to fear as regards the rising rate of inflation.They noted that since the government had said the particular bond issue was linked to inflation; investors should be rest assured that their returns on the long run would not be impacted negatively by inflation.The President, Association of Stockbroking Houses of Nigeria and Managing Director, Trust Yield Securities Limited, Mr. Rasheed Yussuf, described a bond as a debt that must be paid, adding that the investor would appreciate it better when its interest surpassed the prevalent rate of inflation.He said, People have to understand what this is; a bond is a debt. You are asking some people to give their money in exchange for you paying them certain return, which will come to fund technical needs.When you say it is inflation-linked, it means that if the rate of inflation is 10 per cent, you are promising investors something higher than the rate of inflation.Yussuf noted that the development was welcoming as it would encourage investments in Federal Government bonds and would also broaden the domestic bond market.So, what they (government) are probably saying is that if it is 10 per cent, they will give the investor 11 per cent or 12 per cent. That is what it is meant by saying inflation-linked bonds. It means the rate will be linked to the rate of inflation and this is quite encouraging and interesting, he said.The Assistant Director, Membership and Student Affairs, Chartered Institute of Stockbrokers, Mr. Vincent Adubor, told our correspondent that the introduction of the inflation-linked bonds would mean well for investors considering the attractiveness of the bond market.Bond returns are more assured and more attractive, especially during periods of increasing inflation. So, whether you are sceptical or afraid of how the market fares, you are guaranteed in the bond market, not to talk of when the government says it is a bond linked to the rate of inflation, he said.The Director-General, DMO, Mr. Abraham Nwankwo, had said the timetable for the bond issuance would be finalised in the first quarter of 2012.Were trying to reach higher levels of maturity in the market. Weve had four to five years of plain vanilla. This is the time to think of a little more sophisticated variant of the bond, he said.Nwankwo noted that country would issue a Diaspora bond next year to raise funds for infrastructure and development projects from Nigerians resident abroad.Nigeria is most likely to have a Diaspora bond in the market in 2012. We are working seriously on it. The Finance minister has talked about Diaspora bonds. She has given us instructions to progress on that, he disclosed.The DMO boss explained that the agency was working hard to ensure that it structured the bond in a manner that was consistent with the preferences of Nigerians in the Diaspora and at the same time mobilise resources to fund the provision of critical national infrastructure and development projects.On the planned Diaspora bond issuance, Yussuf noted that it would be sold to people living outside Nigeria, adding that the development would also impact the local bond market positively.He said, If it is Diaspora bond issue, then it is similar to that of inflation in a way. This is because it is a debt instrument but you are now saying you are going to ask people in the Diaspora to buy it, making them the ones to lend you the money.So, they are designed to attract lending from people who are in the Diaspora.Adubor corroborated what the ASHON president said by adding that the initiative would attract investors to the bond market.The liquidity position of individuals is also very low at the moment. For instance, if you have invested in bonds at this time, what kind of match do think you can get in equity trade' The bond market is where returns are guaranteed, he said.The DMO boss said the agency was planning road shows in the first quarter of 2012 in Europe, North America and possibly the Middle East and South East Asia.He noted that the response to the road shows earlier held in London, United Kingdom and Texas, United States in the last two years had been encouraging.Nigerias annual inflation stood at 10.3 per cent in September and has been in double digits for most of the last two years.
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