Items filtered by date: Tuesday, 23 October 2018
Larochelle Smit has endured attacks for dating outside her race but when she got a racist Facebook message from the mother of a man she used to date, she decided enough was enough.
 
Speaking to Newsmen on Tuesday, 28-year-old Smit said she was shocked when nurse Elaine Jacobs sent her the "absolutely disgusting" private message last month.
 
Jacobs has since claimed that her Facebook account was hacked. The Life Healthcare group, which the nurse listed as her employer on her profile, has stated that it will not utilise Jacobs' services at any of its hospitals.
 
The message, which has caused outrage on social media, reads: "Ek meen jy's n boere sa meisie maar jy wil soos n kardasian lyk??? En met k***** uit gaan?? [sic]" (I mean you are a Afrikaans South African woman but you want to look like a Kardashian? And date k*****?)
 
Smit explained that she dated Jacobs' son about a decade ago and that Jacobs had kept her as a friend on social media.
 
"I don't know if she has any ill feelings. She has seen photos of me and my boyfriend. This woman somehow felt the need to message me and enquire [about my makeup and boyfriend]."
 
Bullied
 
She said she showed the message to her boyfriend, who tried to calm her down.
 
"From the time I have started dating outside my race, I have been bullied and been a victim of such awful comments. Largely from the Afrikaner community. I have reached a point where enough is enough."
 
Smit, who is based in Sandton but is originally from Durban, said former eThekwini speaker Logie Naidoo was helping her lay a complaint with the South African Human Rights Commission.
 
She has also opened a case at the Sandton police station.
 
Replying on Facebook to Smit in the comments section on Sunday, Jacobs said: "Hi there guys facebook just let me know about this and this is the first time ive ever seen this comments i asume my facebook was hacked,im trully sorry about this. And would ever in my life comment something like that.
 
No longer employed at Lifecare
 
Life Healthcare human resources executive Chris Gouws confirmed on Tuesday that Jacobs was not currently employed by Life Anncron Hospital in Klerksdorp, as stated on her Facebook profile.
 
"We can, however, confirm that she is a former nurse having resigned from the hospital in 2012. Thereafter, she worked for a nursing employment agency and her last shift at the hospital as an agency nurse was in October 2017."
 
Gouws said racial hate speech was a very serious matter and the behaviour contravened the company's values and policies.
 
"Despite the fact that Ms Jacobs was not in our employ at the time of her post, we have reached out to the nursing agency and informed them that Ms Jacobs' services are not to be utilised at any Life Healthcare hospital. The group has also made the decision that Ms Jacobs' services will not be utilised at any Life Healthcare facility in the future."
 
 
Source: News24
Published in World
Global markets fall once again on Tuesday after brief two-day relief rally.
A "poisonous brewing cauldron of geopolitical and economic issues" is to blame for the risk-off sentiment gripping investors.
Losses are led by Asia, which has seen virtually all major indexes drop more than 2% on Tuesday.
Europe is following suit, with Germany's DAX down more than 1.2%. US futures are also pointing to substantial losses.
The JSE fell almost 2%.
You can follow the latest developments in global markets at Markets Insider.
Global markets slumped once again on Tuesday as the continent's two-day-long relief rally came to an abrupt end, thanks to a cocktail of negative drivers.
 
All major Asian indexes lost ground during Tuesday's session, with the FTSE China A50 the biggest casualty, down more than 3%. Other mainland Chinese indexes lost more than 2%, with the Shanghai and Shenzhen Composite indexes both down around 2.2%.
 
Losses were not contained to China, however, with Japan's Nikkei losing 2.7%, and Hong Kong's Hang Seng dropping close to 3% after a sharp fall into the close.
 
There was no single catalyst for the losses, with growing geopolitical tensions between Saudi Arabia and the West over the death of journalist Jamal Khashosggi, resurfaced fears about President Trump's trade war, and generally waning confidence in the Chinese economy all partially to blame.
 
"Big swings in the Chinese markets continued, with the previous two-day rally moving sharply into reverse. After mulling over Chinese stimulus plans the market is seeing these stimulus measures as cushioning a fall rather than boosting the economy," Jasper Lawler, head of research at London Capital Group said in a morning briefing.
 
"It was all too much for the markets on Tuesday. The poisonous brewing cauldron of geopolitical and economic issues led to one of those opens as nuance-less as it was red," Connor Campbell, analyst at Spreadex added.
 
Fears abound that the sell-off in China could get worse as a wave of forced share selling kicks in for Chinese companies who use their shares as colleteral for loans.
 
According to Bloomberg, about 4.18 trillion yuan (R8.7 trillion) worth of shares have been put up by company founders and other major investors as collateral for loans, accounting for about 11% of the country's stock market capitalization, based on calculations using China Securities Depository and Clearing Corporation data.
 
The South China Morning Post, citing a report by Tianfeng Securities, said earlier in the week tha tmore than 600 company stocks have fallen to levels where forced sales may kick in.
 
"It's a vicious cycle: share drops lead to liquidation and liquidation leads to further share drops," Wang Zheng, chief investment officer at Jingxi Investment Management told the South China Morning Post last week.
 
The JSE's all share index was down 1.7% by midday, but the rand was marginally stronger at R14.35/$.
 
Naspers, down 3% to R2,725.58, and Nedcor, which lost 3.7% to R225.03 were some of the worst hit among large companies. 
 
Gold stocks are booming again, with Sibanye up 11% to R11.64. Nervous investors are buying gold, which jumped a percent to $1,234/oz this morning.
 
European stocks have also witnessed losses in the first hour of trading, although not as severe as those in Asia. By midday, Germany's DAX has dropped 1.2%, while the UK's benchmark FTSE 100 index is around 0.7% lower. The Euro Stoxx 50 broad index is down 0.8%.
 
"Sentiment continues to take a hit from a combination of geopolitical tensions including the growing isolation of Saudi Arabia, Italy's defiant stance towards the ECB and Brexit," Lawler said.
 
US futures are also pointing to big losses when markets open stateside, with the Nasdaq pointing to an opening loss of 1.1%, while both the S&P 500 and the Dow Jones look to fall around 0.9%
 
 
Source: Bloomberg news
Published in World
After 9 years of construction and controversy, China has officially unveiled the world's longest sea bridge, built at a cost of R286.4 billion.
 
At more than 54.7km long, the Hong Kong-Zhuhai-Macau Bridge is part of a master plan to create a global science and technology hub by connecting two Chinese territories, Hong Kong and Macau (the world's largest gambling center), to 9 nearby cities.
 
With an economic output of R21.5 trillion, the new mega-region - known as the Greater Bay Area - is positioned to rival Silicon Valley. The plan also includes the construction of a R157.5 billion bullet train, which opened in September.
 
The bridge is expected to open to traffic on Wednesday, though only certain vehicles - shuttles, freight cars, and private cars with permits - are allowed to cross. Pedestrians and bicyclists are prohibited.
 
While some have criticised the structure as a waste of taxpayer dollars, others tout its ability to connect up to 70 million people in the region.
 
The title of world's largest sea bridge previously belonged to the Jiaozhou Bay Bridge, which stretches 42.3km.
 
The Hong Kong-Zhuhai-Macau Bridge is designed to last for more than a century, with the capacity to withstand major storms and earthquakes.
The structure should hold up in the face of 340km winds. That claim was put to the test in September, when Typhoon Mangkhut swept through Hong Kong, destroying roofs, shattering windows, and toppling trees.
 
The bridge is made of 420,000 tons of steel — enough to build 60 Eiffel Towers.
 
 
Source: Business Insider
 
 
 
Published in Engineering

A hearing in the court case between MTN and the Central Bank of Nigeria (CBN) in a disagreement over the alleged repatriation of $8.1 billion by the telecommunication company has been set for October 30, MTN’s lawyer, Wole Olanipekun, has said.

Olanipekun said it on Friday that MTN denied claims that it depleted Nigeria’s foreign exchange reserves.

Recall that CBN had in late August alleged that MTN repatriated a total of $8.1 billion from the country through illegal means.

The financial regulator further directed the telco to refund the money and imposed a combined fine of N5.87 billion on four banks – Standard Chartered Plc, Citigroup Inc., Stanbic IBTC Plc and Diamond Bank Plc – that allegedly aided the process.

Nigeria is MTN’s biggest market and accounts for a third of its annual core profit. This explains why the claim which led to the dispute between the two parties wiped as much as 36 percent off MTN’s market value within two weeks.

The CBN had said in its counterclaim to the court that MTN contributed to depleting the country’s reserves through the purchase of dollars via unapproved certificates. MTN however denied any wrongdoing.

Crude oil is Nigeria main source of foreign exchange earnings, the nation’s external reserves was greatly depleted in 2016 following the drop of crude oil prices in the international market.

This contributed to the sharp drop in the value of Naira and further led the country’s economy to a recession in the same year, which the country emerged from last year.

 

Source: The Router

Published in Business
Following expected shortfall in Nigeria's independent revenue and recoveries, fiscal deficit in the 2018 budget is likely to widen by about 132 percent, according to a report by Afrinvest West Africa.
 
This implies the nation may have to increase its borrowing to meet up some of its spending obligations for the 2018 fiscal year, even as concerns over the nation’s rising debt profile heightened.
 
Data from the Debt Management Office reveals that Nigeria’s external debt profile rose by 114 percent from N10.32 trillion in June 30, 2015 to N22.08 trillion as of June 30, 2018.
 
In the ‘Nigerian Banking Sector Report’ by the Lagos-based investment banking firm, which was launched on Monday in Abuja, government’s independent revenue and recoveries, accounting for 40.5 percent of total projected revenues in the 2018 budget was predicted to underperform by 40 percent.
 
The company said the projection, which was premised on political distractions caused by election campaigns ahead of the 2019 polls, might widen fiscal deficit up to 3.5 percent of nominal Gross Domestic Product (GDP.
 
On June 20, President Muhammadu Buhari signed the 2018 Appropriation Act into law. The budget with an estimate of N9.12 trillion has N2.87 trillion allocated for capital expenditure and N3.51 trillion for recurrent (non-debt) expenditure.
 
A breakdown of the budget shows that a total of N2.01 trillion was estimated to be spent on debt servicing, deficit was put at N1.95 trillion, while statutory transfer and sinking fund were allocated N530 billion and N190 billion, respectively.
 
The budget was expected to be funded by N2.99 trillion to be generated from oil revenue and N31.25 billion from Nigeria Liquefied Natural Gas (NLNG) dividend.
 
Revenue from minerals and mining was projected at N1.17 billion; N1.25 trillion from non-oil revenue of which N658.55 billion will be generated from Companies Income Tax (CIT); N207.51 billion from Value Added Tax (VAT); N324.86 from the Nigerian Customs Service (NCS), while N57.87 billion was expected to come from Federation Account levies.
 
Furthermore, the government projected N847.95 billion from independent revenue, while N374 billion was expected from domestic recoveries, assets and fines, and N138.44 billion from other federal government recoveries.
 
Tax amnesty income was put at N87.84 billion; unspent balance in previous fiscal year, N250 billion, and signature bonus was to generate and N114.30 billion.
 
But according to the report, while the revenue projection from oil was achievable owing to increased oil prices in the internationals market, that of independent revenue and recoveries remained undoubtful.
 
“The Federal Government plans to generate 41.6 percent of its revenues from oil and the remainder from taxes, independent revenue and recoveries, which account for 40.5 percent of total projected revenues and have historically underperformed.
 
“Given these considerations as well as political distractions, we estimate a significant underperformance in revenues by 40 percent.
 
“Hence, we estimate the fiscal deficit to expand to N4.4 trillion above budget estimate of N1.9 trillion, representing 3.5 percent of nominal GDP, well above the three percent threshold prescribed by the Fiscal Responsibility Act,” the report read in part.
 
 
Source: The Ripples
Published in News Economy
As part of its economic diversification drive, the federal government of Nigeria on Monday said it has issued the first gold refining license in the country.
 
Speaking at the ongoing 24th Nigerian Economic Summit (NES) in Abuja, the Minister of Budget and National Planning, Senator Udo Udoma, said the development was one of the outcomes of Economic Recovery and Growth Plan (ERGP) Focus Labs.
 
Udoma said the government issued the license to Kian Smith Limited, adding that the ERGP plan has achieved its objective as it was conceived primarily to get the nation’s economy out of recession.
 
“As an outcome of the ERGP Focus Labs, we have also been able to accelerate the development of the National Gold Development Policy and the establishment of a Federal Gold Reserve Scheme in Nigeria.
 
“Today, I am happy to report that the first gold refining licence has been issued to a company called Kian Smith Limited, which was one of the companies that participated in the labs.
 
“Indeed, the Federal Government is finalising modalities to purchase gold from local refineries via a Federal Gold Reserve Scheme subject to international standards ,such as the London Bullion Market Association,” the minister said.
 
He added that a local automobile assembly in Imo State, Autodex Limited, was being supported to double its capacity for the production of farm tractors.
 
The NES is an annual event that brings together chief executives/top level operators from the private sector and very senior Government officials to discuss how best to develop the Nigerian economy and monitor the progress that is being made.
 
The main focus of the summit is the short to medium term policy direction while giving priority to the national interest in the context of the evolving global economy.
 
This year’s edition was themed “Poverty to Prosperity”, it commenced yesterday (Monday) and it is expected to end today (Tuesday), October 23, 2018.
 
 
Source: The Ripples
Published in Economy

The World Economic Forum has released its 2018 Global Competitiveness Report, ranking Mauritius in 49th position.

Mauritius is the highest placing African nation in the list of 140 countries, despite having dropped four positions from the previous year’s report. 

South Africa is the second country from the cotinent on the list, ranking 67th – down from placing 61st the previous year.

Seychelles is the third most competitive economy in Africa, climbing 33 ranks to sit at number 74.

Morocco immediately follows, no longer holding third place, at number 75. In 90th position is Botswana. 

Algeria, Kenya, and Egypt descend from position 92 to 94, respectively, with Algeria and Kenya falling places but Egypt climbing up from 100.

Namibia has replaced Egypt, coming in at 100th position – making it the ninth most competitive nation in Africa.

Ghana is Africa’s tenth most competitive country at 106th place, followed by Rwanda and Cape Verde, which respectively rank 108th and 111th.

African nations then cover positions from 114th to 125th, with Côte d'Ivoire, Nigeria, Tanzania, Uganda, Zambia, The Gambia, eSwatini, Cameroon, Ethiopia, Benin, Burkina Faso, Mali, and Guinea respectively holding the ranks.

Zimbabwe is then placed at 128th position, followed by Malawi at 129th, Lesotho at 130th, Mauritania at 131st, Liberia at 132nd, Mozambique at 133rd, Sierra Leone at 134th, DRC at 135th, Burundi at 136th, Angola at 13th, and Chad at 140th.

 

- Leadership

Published in Business

As elsewhere in the world, migration is increasingly at the centre of South Africa’s public and political debate. For the first time, the country’s official opposition party, the Democratic Alliance (DA), has released a document outlining its “immigration plan” for the country.

In advance of next year’s national election, this is the first of many policy documents intended to distinguish the party and win voter support. In a country where many citizens are uncomfortable with current migration patterns, this is an important, if contentious, move.

This pandering to populism signals heightening competition in South Africa’s electoral politics. The party is smelling electoral blood, most importantly the possibility of winning Gauteng, the country’s most populous province and its economic hub, in next year’s elections. In the 2016 municipal elections, the party made significant gains against the long dominant African National Congress (ANC). Following those elections, the party now governs the country’s most important cities– Johannesburg (the country’s largest city), Tshwane (administrative capital) and Cape Town (South Africa’s second city and legislative capital). In next year’s general elections, they look to expand their provincial mandates beyond the Western Cape.

After years as a small minority party, the DA is now seeking a platform that can reach beyond its traditional white, wealthy base. Against accusations of racism within the party and concerns that it is out of touch with the poor majority, the DA is grasping for policies to attract new black voters without alienating its current constituents. Given widespread popular concerns about the levels of immigration from neighbouring countries (particularly Zimbabwe and Mozambique), South Asia and China, this is an issue that can reach voters across the economic and racial spectrum.

The problem is that the DA’s new immigration proposal offers little new. Worse, with policies like this, the party is falling into the same trap as the ANC: offering policies that are vague and founded on fantasy not fact.

Like the ANC, the DA’s desperate politics plays to populism. There was a time when the DA tried to sell South Africans on a technocratic state founded on facts and bureaucratic capacity. This proposal reflects a shift to policy formation founded on myth and political expediency.

The plan

While the DA’s immigration plan

openly rejects all anti-immigrant sentiment and ‘build a wall’ paradigms

it nevertheless puts forward a flawed understanding of immigration, namely that South Africa’s considerable social problems – crime, unemployment, inequality, poverty – are somehow attributable to immigration and bad border control.

The party’s position reads like a post-hoc justification for its Johannesburg Mayor Herman Mashaba’s continued rhetorical assault on undocumented immigrants.

Like him, the policy proposal recognises the contributions highly skilled migrants make in boosting businesses and creating jobs. But, apart from the wealthy and educated, immigrants remain unwanted. Here the policy echoes statements from across the political spectrum accusing foreigners of promoting corruption while eroding the country’s security, social cohesion and prosperity.

It is convenient to burden immigrants with the country’s social ills, but the facts simply do not support this. South Africa doesn’t have perfect data, but all scientific analysis indicates foreigners make up only between 3%-5% of the total population of the country’s 55 million residents.

And South Africa isn’t an exception – the numbers of immigrants are similar to many other countries. Even if it does receive the most immigrants of any African countries these are simply not enough people to explain the country’s high levels of crime, corruption and unemployment.

More of the same

The DA’s immigration policy reflects little empirical research. Nor does it distinguish itself from ANC policy as the party boasts. Instead, large sections of this policy appear cribbed from the ANC-drafted “White Paper” on International Migration. Perceived problems with porous borders and corruption are precisely why the ANC has proposed a border management agency.

For its part, the DA argues for a migration agency that would be nominally more democratically accountable. But this is much of a muchness. Even the DA’s big push for highly skilled immigrants to meet the needs of big business is reflected in ANC policy.

The DA’s policy also echoes the twisted humanitarian logic that has informed European responses to migration and the ANC’s own immigration policing efforts. Across all of them, the argument runs that protecting migrants demands that they are legally in the country. Yet rather than open channels for people to obtain legal documents and status, the DA proposes restricting them. Only those who come properly and in line with stringent admission requirements can stay.

This is why European countries have largely banned rescuing migrants in the Mediterranean lest they encourage unsafe migration. It is also the same impulse that motivated the ANC-led government’s “Operation Fiela” in 2015 that saw the arrest of tens of thousands of migrants to protect them from xenophobic attacks. This is a perverse humanitarian logic used to disguise an underlying isolationist nationalism. Although it intends this as a means of challenging the ANC, the DA is in fact very much on the same side.

Political expediency

The DA’s immigration policy is also without vision. It is reactive – primarily to the ANC’s perceived shortcomings.

Both parties are appeasing South Africans by promising a sense of control. In fact, lessons from other countries suggest that it isn’t immigration, per se that bothers voters. Instead, consternation arises from perceived threats to order. Immigration is a distraction.

There are real problems such as human rights abuses and corruption at the border, as well as challenges for low-skilled South Africans competing with undocumented migrants. But addressing these will not create the physical or economic security South Africa needs. Informed by the same sentiments of fear and exclusion that led to Brexit and US President Donald Trump’s election, they are distractions.The Conversation

 

Loren B Landau, Research Chair on Mobility & the Politics of Diversity. Migration; Urban Transformation, Xenophobia and Inclusion, University of the Witwatersrand

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Published in Economy
Tuesday, 23 October 2018 06:58

Understanding how to invest in bonds

One of the fastest and most reliable ways of building financial wealth and planning for retirement in this challenging economy is investing your little earnings rather than saving in banks with little or no return on savings.
 
Investment provides you with the opportunity to put your money in a vehicle with the potential of earning high rates of return thereby fast-tracking the rate of increasing your financial worth.
 
However, investments are not totally risk-free, but with the right information, you can make informed-decision on how to grow your money even while engaging in other ventures.
 
While there are several forms of investments, bonds – fixed income securities – are one of the safest of the three main generic asset classes including stocks and cash equivalents to invest in because of its low default risk.
 
What is a Bond?
 
A bond is a contract where a lender (investor) loans out his excess money to a borrower having little or no funds to finance new projects or refinance existing debts, the borrower agrees to pay the lender interest payments and repay the principal after a stipulated period.
 
The borrower could be a government entity – Federal or State Government – or a corporate organisation wishing to raise capital to finance its operations.
 
Before a bond is issued, both parties will agree on the maturity date (time which the loaned fund will be returned) and amount (percentage of the principal to be paid) the bondholder will earn for loaning his funds to the issuer, this is often referred to as coupon.
 
For example, Company AB seeks to raise capital to build a new warehouse. The company issues a 20-year bond of N100,000 of several portions at 7 percent annual coupon rate, implying that for the next 20 years when the bond will mature, an investor with N1,000 face value of a portion of the bond will earn N70 annually as coupon. At the maturity date, the investor gets his N1,000 principal (face value) and his last N70 coupon.
 
Federal Government of Nigeria Bonds
 
The Federal Government of Nigeria (FGN) through the Debt Management Office (DMO) often issue a number of debt instruments including the monthly FGN Savings Bonds which have tenor of 5 years, 10 years and 20 years.
 
Other FGN Bonds include Green Bond, Sovereign Sukuk Bond, Eurobonds and Diaspora Bond.
 
Green bonds are fixed income, liquid financial instruments issued in partnership with the Federal Ministry of Environment to raise funds towards financing climate mitigation, adaptation and other environment-friendly projects.
 
Sukuk Bond, also known as Islamic Bond, is a financial instrument structured to generate returns without interest payments, it is targeted at funding road infrastructure across the country, while Eurobonds are special debt instruments issued in a currency different from the currency of the country or the market in which the bond is issued.
 
Benefits of FGN Savings Bonds
 
The FGN Savings Bonds allow low-income earners to save and earn more interest than the regular bank savings. For this category of bonds, investors lend to the federal government to fund its budget deficit and earns a percentage of his investment annually, semi-annually or quarterly until the bond matures and the investor gets his initial payment.
 
FGN Bonds are traded publicly on the Nigerian Stock Exchange (NSE) and Financial Markets Dealers Quotations (FMDQ) Over-the-Counter Securities Exchange. Interests on the bonds are not taxed, the bonds can easily be traded or used as collaterals, and repayment is guaranteed at maturity.
 
Bonds Trading
 
The bonds are first issued to the public in the primary market such as the example given for Company AB. The bondholder (investor A) gets a certificate having the face/par value, annual interest rate payable and maturity date written on it.
 
However, the investor may wish to sell the bond before the maturity period (20 years) to another investor, transactions between two investors after issuance can be performed in the secondary market at a market price which is determined by the force of demand and supply, inflation, interest rate of the bond and credit quality.
 
In the secondary market, bonds could trade at a premium or at a discount. When investor A decides to sell his portion of Company AB’s at a market price above N1,000, for example N1,100, then the bond is trading at a premium (above par value), but if he sells at a lower price, for example N950, then the bond is trading at a discount (below par value), even though the face value (original price) of N1,000 of that portion of bond does not change regardless of changes in the market price.
 
This indicates that investor A could either gain N100 (market price – cost price) in the first case or incur a loss of N50 in the other case.
 
But if investor B (a new investor) decides to buy the N1,000 par value bond from investor A after 5 years at N950 in the secondary market and resells after 10 years, which is before the 20-year maturity date, at N1,050. Then, investor B will make a profit of N100 (N1,050 – N950) and not N50.
 
Now as a potential investor, you may want to consider any of the FGN Savings Bonds to join the list of investment-included Nigerians. To do this, you will need contact any licensed Primary Dealer and Market Makers (PDMM) listed on DMO’s website. It could be a bank, investment firm or broker, you will fill forms to create a brokerage account. The form gathers basic investment information including your bank account details.
 
If you want your bond to be listed on the NSE or FMDQ, you will need a CSCS account, this would give you a leverage if you want to sell before maturity date.
 
It is also important to understand your investment timeframe, choose a bond that will mature when you will need the money if you do not intend to sell before it matures. A 20-year bond will be suitable for anyone who plans to retire in 20 years’ time, the longer the duration, the higher the interest rate.
 
Investing in FGN Bonds
 
FGN Bonds are offered every month at N1,000 per unit subject to a minimum subscription of N5,000 with increases thereafter in multiples of N1,000 up to a maximum of N50 million.  They are backed by the full faith and credit of the Federal Government with quarterly coupon payments to bondholders, indicating it is almost unlikely for the government to default payments.
 
The FGN Bonds offerings are conducted in an auction-based system, often for a period of a week after DMO’s announcement. At the auction, investors quote interest rates for bonds they intend to buy. After the close of biddings, bids with interest rates below the marginal (average) rate are accepted while those above are rejected, implying that interest rate for the bond changes based on the auction result.
 
Successful bidders are notified after the auction while for unsuccessful ones, probably because of high interest rate above marginal rate, a refund is made to the account with investors’ brokers, such unsuccessful bidders may decide to wait till the next primary auction or buy from any investor that won the bidding and willing to sell or from brokers.
 
The amount paid (market price) for FGN Bonds is dependent on the interest rate and yield. That is, N1,000 bond at 10 percent interest rate will return N100 as coupon. If the marginal rate is 15 percent, then the price payable is calculated by dividing the coupon by the marginal rate (expected yield), which in this case is N666.67 for a bond with N1,000 face value.
 
Apparently, when yield is higher than the coupon, the bond is sold at a discount, but when the coupon is higher than the yield, the bond is sold at a premium.
 
Also, the above expression indicates that there is an indirect relationship between the market price of a bond and its yield. That is, when the price rises, the yield drops and vice versa.
 
If your choice is to buy at a discount, sell at a premium or most importantly make profit should you decide to sell before maturity, it is advisable to seek your broker’s advice, not only for the choice of bond to invest in, but also for proper guidance on your other investment decisions.
 
 
Published in Opinion & Analysis

  1. Opinions and Analysis

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