Nigeria: FMDQ exchange debt market size rises to $46.1bln

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THE Financial Markets Dealers Quote (FMDQ) Exchange has revealed that the exchange’s debt market size, made up of various debt instruments, as at August 15, is N73.06 trillion.

Finance experts describe debt market instrument as any fixed income asset that allows the lender (or giver) to earn a fixed interest along with the principal amount while allowing the issuer (or taker) to use it to raise funds at a cost.

Debt market instruments acts as a legal obligation on the issuer (or taker), who will have to repay the borrowed sum along with the interest to the lender in a timely manner.

Some examples of debt market instruments include debentures, bonds, certificates, bills of exchange, leases, among others.

Not necessary to be on paper, it can also be in an electronic form. The oldest and the largest element of the debt market instruments are the government securities, which play a very important role in the economy by providing a benchmark to determine the level of interest rates in the country.

With the FMDQ Exchange platform being responsible for about 100 percent of bonds traded in Nigeria, listings and quotations service stands differentiated in the Nigerian debt capital markets.

Banks and financial institutions are allowed by the Central Bank of Nigeria (CBN) to conduct transactions in debt instruments with non-bank clients and also among themselves. Notably, debt instruments provide fixed and higher returns, thus giving them an edge over fixed deposits by the banks.

According to experts, the duration of these instruments can either be long-term or short-term. Funds that are raised through short-term debt instruments must be repaid within a year, for example, credit card bills and treasury bills.

On the other hand, long-term debt instruments are the ones that are paid over a year or more, for example, long-term loans and mortgages.

The FMDQ notes that bonds listed and admitted on its exchange are traded by the dealing members, some of which act as primary dealers to the sovereign domestic bonds.

FMDQ dealing members (b00anks) 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.