• Friday, March 29, 2024
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FSDH recommends issuance of zero-coupon bonds for debt management

FSDH

FSDH Research, the research arm of FSDH Merchant Bank Limited, is recommending issuance of zero-coupon bonds, in order to manage the high interest expenses on the debt of the Federal Government relative to its current revenue.

In a Monthly Economic and Financial Markets Outlook: ‘Economy in Need of Boosters: Priorities for a Second-Term’, FSDH Research said such bonds and other bond issue going forward, should be tied to specific projects that have economic value addition to the country. And there should be a mechanism to assess that debt contracted is used for intended projects.

The firm asked the government to consider crude oil swap arrangements with construction companies either local or foreign, for road or rail construction across the country. This will help to accelerate the development of road and rail transportation in the country and also reduce direct government expenses on such projects. Eventually, such projects will improve competitiveness of the Nigerian economy.

Presenting the report to Journalists in Lagos, Ayodele Akinwunmi, head of research, FSDH Merchant Bank Limited, said, there is the need for urgent passage of all the bills in the Oil and Gas sector and such bills should be signed into law.

This he said will bring about more clarity in the Oil and Gas sector and enable investors take long-term investments in the sector. It will also help to attract Foreign Direct Investments into Nigeria and will also create jobs in addition to increasing the revenue for the country.

Available data from the CBN shows that Foreign Direct Investments accounted for only 11 percent of the total capital importation into the country between 2010—2018. Foreign Portfolio Investments accounted for 70 percent of the total capital importation during the period while other investments accounts for 19 percent.

The high FPIs reduce the effectiveness of any exchange rate management regime. This is because of the distortions that are usually associated with the Foreign Portfolio Investments particularly in small developing countries like Nigeria.

FSDH research asked government to engage Nigerians in diaspora and sell investments opportunities to them, both debt and equity in government instruments and entities in order to drive foreign remittance inflow. Nigeria is among the countries with lowest growth in the foreign remittance inflows between 2008 and 2018, according data from the World Bank.

“Government should continue to implement policies and strategies that will end and maintain security of lives and properties in the country”, Akinwunmi said.

The firm said the Federal Government needs to appoint members of the cabinet with their respective portfolios in the month of June. This will enable them start the implementation the Next Level Growth and development agenda of the Federal Government of Nigeria (FGN).

 

HOPE MOSES-ASHIKE