The preponderance of debt instruments in the Nigerian capital market has been described as one of the major factors working against the development of the equities market, years after the global economic meltdown.
Stock brokers who eared their views on the impact of increasing bond offering to the market, said that hence the debt instrument offers guaranteed returns on investments, most investors are avoiding the high risk aspect of savings through the equity market, to the debt market where coupon is sure.
A Lagos based stockbroker, Dr. Jessica Okechuku who spoke on the recent drift of attention from equities market called on investors who prefer guaranteed returns on investments to beware of higher returns which may not be guaranteed.
She said that the bond market currently provided better alternative to the equities market and that though many investors prefer to take advantage of the higher earning end of the equities market to grow their funds, but many others prefer the sure earning from the fixed income instruments, to the uncertain , but expected higher income from equities.
She said “ equity is supposed to be the heartbeat of the capital market because of higher earnings that comes from investments in stocks, but when taking cognizance of the market now, and when you have idle funds, if you have good money and you want to make good money, it better to have a fixed income than nothing at all”
She said that though investments in equities market is gradually picking up, but uncertain earning opportunities in the market, may warrant some liquid investors to take to investing in bonds where they have opportunity to benefit from guaranteed income.
“You know that investment in bonds yields coupons ones or twice a year and investors can leverage on this to grow their funds over a given period” she said. According to her, investors who have taken to investing in the secondary bond market, stand the opportunity of realizing their objectives, adding that this informed the decision of more drift from the equities to the debt instrument market.
Mr. Solomon Olaosebikan, another Lagos based stock broker said that debt instrument represents an integral part of the capital market and that investment in the instruments also represents investments in the market.
“The debt instrument market is of lower risk and lower returns while the equities market is of higher risk and higher returns, those that have opted or are opting for the debt instrument market have conditioned their minds for lower risks and lower earnings, while others that have remained win the equities market are for higher earnings hence there are exposed to higher risks.”