Uncertainty in the investment clime may be pushing investors to opt for more secured investment instruments.
Some
investment advisory firms have been encouraging their clients to switch
to money market instrument in order to secure their investment and
enjoy more returns. This may have counted for the loss recorded in the
equities market in the last one week.
FSDH Securities Limited, an investment advisory firm, recently challenged its clients to reconsider their investment plans.
“In
recent times, we have observed that the return on Nigerian Treasury
Bills (NTBs) investment has been higher than the returns on Fund
Placements. This has resulted in increased participation of
institutional investors in NTBs. Driven by our desire to continue to
provide our individual clients with opportunities to grow their
investments through value added products, services and supports, FSDH
wishes to introduce you to investment opportunities in the NTBs,” the
firm stated in a note to its clients last week.
Treasury
Bills are short term debt instruments issued by the Federal Government
through the Central Bank of Nigeria (CBN) to provide short term funding
for the government. NTBs are the most liquid money market securities
backed by the guarantee of the Federal Government, and are usually
issued for tenors of 91 days, 182 days, and 364 days.
Treasury
Bills are discounted, purchased for a price less than their face value,
and at maturity, the holder of the bills is paid the full par value by
the government.
Last week, 91-day and 182-day treasury bills were sold at marginal rates of 7.3 per cent and 9.3 per cent respectively.
Flexible tenors
According
to FSDH, investment in NTBs provides opportunities with flexible tenors
and attractive returns. Upward adjustment in the Monetary Policy Rates
(MPR) last month from 6.25 to 6.50 per cent resulted in rise in key
money market rates.
Analysts at Afrinvest, another investment firm, in their out outlook expect investors to react to the increase.
“Investors
reacted to the increase in the MPR as yields on tradable maturities
inched upwards in the two-way quote market for NTBs last week,” said
the firm in its weekly report on Friday.
Marginal drop in bond yields has also made the treasury bills window more attractive.
Victor
Ogiemwonyi, managing director of Partnership Investment Limited, a
Lagos-based financial and investment company, said investors who want
to stay safe would prefer to invest in NTB.
“Investing
in NTB is like taking a neutral position when you do not know how
things will turn out, when you do not want to make long term
commitments. Bond is long term; equities could dip at this time of
market uncertainty. If I was advising, I will say stay three to four
months with treasury bills,” Mr. Ogiemwonyi said.
The
stock market shed N343 billion in the last one week, closing on Tuesday
at N8.541 trillion. It, however, rose yesterday, by 0.77 per cent to
close at N8.607 trillion.
Mr. Ogiemwonyi said investment decision would depend on the risk appetite of the investor.
“There are others who are speculative, who can see some prospect in
the clutter of uncertainty. To this group, I would advise them to
invest in equities because some opportunities exist in the stock market
right now,” he said.
