Bonds

With the FMDQ Exchange platform being responsible for circa 100% of bonds traded in Nigeria, our Listings & Quotations service stands differentiated in the Nigerian debt capital markets. Having ushered in unprecedented transparency, secondary market liquidity and process efficiency to the activities in the Nigerian bond market, FMDQ Exchange continues to demonstrate its commitment to making the markets within its purview globally competitive.

Bonds listed and admitted on FMDQ Exchange are traded by the Dealing Members, some of which act as primary dealers to the sovereign domestic bonds. FMDQ Dealing Member (Banks) act as market makers to the Nigerian sovereign bonds, thereby providing trading liquidity to these bonds.
The following bonds, among others, can be listed and traded on FMDQ: Sovereign, Agency, Sub-national, Supranational, Corporate, Eurobonds, Short-Term and Sukuk.

These are long-term debt securities issued by the Federal Government of Nigeria through the Debt Management Office, used to support government spending. Government bonds are generally regarded as the safest bond investments since they are backed by the government of a nation and therefore have the highest credit rating in the government’s nation.

 

These are bonds issued by a government-sponsored agency, backed by the government of the country. Such agencies are usually set up to allow access to low cost of financing for certain areas in the economy e.g. housing, power, transport, etc.

These are long-term debt securities issued by corporations in order to raise finance for a variety of reasons, from building facilities and purchasing equipment to expanding their businesses. Corporate bonds are usually characterised by higher yields than government bonds because there is a higher risk of a company defaulting than a government. They, however, can also be the most rewarding fixed-income investments because of the risk the investors must take on. A corporation’s credit quality is very important as the higher the quality, the lower the interest rate the investors receive.

Supranational entities are formed by two or more central governments with the purpose of promoting economic development for the member nations. Supranational bonds are debt securities issued by these institutions to finance their activities. Similar to government bonds, supranational bonds are regarded as very safe and have high credit ratings. Examples of Supranationals include the International Finance Corporation, the African Development Bank, the World Bank Group and the United Nations.

These are long-term debt securities issued by the state and local governments of a nation to finance projects for the public good like building schools, roads, hospitals and sewer systems.

These are bonds issued in currencies other than the domestic currencies of the issuing entities. Eurobonds are attractive financing tools as they give issuers the flexibility to choose the countries in which to offer their bonds determined by the countries’ regulatory constraints.

Recently introduced to the debt capital market by FMDQ, these are debt securities issued by non-sovereign entities, for tenors between one year and not exceeding three years. These bonds close the current funding gap between short-term money market securities such as commercial papers and the traditional medium- to long-term debt capital securities. For investors, these bonds present a higher yielding alternative to short-term money market securities.

Often referred to as “sharia-compliant” bonds, Sukuk are bonds structured to comply with Islamic law, prohibiting payment of interest on borrowed amounts. Sukuk debt instruments grant investors shares in an asset alongside assumption of commensurate profit and risk. Sukuk are issued through various structures which provide fixed or floating rate payments.

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