Nigerian Bourse May Start Retail Bond Trading by Fourth Quarter

The Nigerian Stock Exchange, sub-Saharan Africa’s second-largest, may introduce retail bond trading by the fourth quarter after conducting test trades last week.

The bourse plans to cater for retail investors who want to trade in fixed income as the over-the-counter market allows only institutional investors due to typical minimum trades of 100 million naira ($629,000) upwards, Dipo Omotoso, assistant general manager of product management, said yesterday in an interview in Lagos, the commercial capital.

“One of the objectives of the NSE is to bring retail bond trading to the exchange, the trade amount is going to be lower than the OTC and that means the retail investors will have another opportunity in another asset class,” he said. “There will be price discovery on the retail side.”

The exchange of Africa’s biggest oil producer is aiming for a market value of $1 trillion by 2016 from just under $80 billion currently, Taba Peterside, head of listings said yesterday.

Nigeria’s domestic borrowing will be 744 billion naira ($4.7 billion) this year, according to the Debt Management Office. Debt costs have advanced, with the yield on Nigerian bonds due November 2013 jumping 403 basis points, or 4.03 percent, to 14.93 percent in the year to May 16, according to prices on the Financial Markets Dealers Association website.

These bonds are traded over the counter, rather than the exchange’s platform. “Before the exchange wanted the OTC to trade on the exchange,” Omotoso said. “But now what we’re saying is we won’t have any impact with the OTC; what we’re going to do is do the retail size that’s not happening on the OTC.”

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