Dear Nairalanders,
I thought to share this information after a long sabbatical from Nairaland as I have been so so busy lately.

As a financial market analyst, I have been part of the investing world that was burnt during the equities market crash of 2008. So many are still being burnt and most recently, Nigerian Equities Investors have lost close to 20% on the average stock between January 2, 2014 and yesterday (November 10, 2014) due to several factors. However, we still cannot shy away from the fact that some investors, as at March to April 2014, have gained at least 40% in this same market.

Today, IPOs are failing, equities issue via private placements are failing and stock market prices are falling to support levels despite companies doing well. Confidence crisis is back, albeit temporarily, at least till after February 14, 2015 Presidential Elections. There may be a momentarily rally before 2015 though.
Even Banks dare not raise Public Offer at the moment. They are resorting to Eurobonds issuance. I tell you, Eurobonds makes a lot of sense for Nigerian Investors. But what is happening? I will share my thoughts.

In as much as there is no need to panic, because the NSE will not crash like the 2008/2009 scenario, the market is not heavily leveraged like before, fundamentals remain slightly firm, but there is a need to diversify your investment portfolio. You got $5 million? Spread it on bonds, fixed deposits, stocks, mutual funds/treasury bills and real estate, my wealth of experience have taught me this. You can't be wrong!

The Central Bank of Nigeria, on the 6th of November, 2014 released a circular titled “Exclusion of Some Transactions from the RDAS Window” The circular directed that the importation of Electronics, Finished Products, Information Technology, Generators, Telecommunication Equipment and Invisible Transactions shall henceforth be funded from the interbank exchange market only.

Given the likely demand/supply mismatch in the NIFEX market, Naira at this market segment and other alternative markets may witness
further depreciation unless the Central Bank intensifies its intervention in this Market segment. This prospect would most likely keep foreign portfolio investors on the sideline until the outlook improves and Naira stabilizes. This is however dependent on the extent of decline in the international crude oil price which has hitherto been a major determinant of the Nigerian economic health.

Events Preceding Eurobonds Issuance by FGN and Corporate Bodies:
Nigeria, rebased GDP in 2013, now largest economy in Africa. Influx of FDIs, FPIs (Power Sector and NSE)
NSE went up and down in 2014. the local banks suffered ‘haircut’ in the assets they sold to AMCON
Falling crude oil price, naira nose-dived against the dollar, boko haram onslaught grew,
Local Capital market was averse to equities offerings, local bond coupons/interests are high, rising bad debts,
Foreign Portfolio Investors (FPIs) sold down their share between June and today, naira fell, foreign exchange reserves depleted, 2015 presidential elections looms
Nigeria resorted to raise Eurobonds (Government and Corporates)

When political uncertainty is high, naira devalues and stock prices go low, diversify buy Eurobonds while also taking advantage of buying low-priced blue-chips for the raining day.
When rate volatility is high, buy fixed-income instruments like bonds.

Bond Investment Justifications
• Yield: The return on investment is constant throughout the tenor of the bond.
• Yield: The bond yield is relatively higher than that of average banks' fixed deposit rates.
• The state bonds have comparatively higher effective yields when adjusted for With-Holding-Tax.
• The bonds are acceptable pledging collateral for accessing CBN Expanded Discount Window obligations and loans from financial institutions.
• Bonds will be listed on the Nigerian Stock Exchanges thereby enhancing their liquidity.
• With the YTD returns of the NSE standing negatively tall at (19.586%), a more stable investment instrument like bonds seem to be safe haven at this time of investment volatility.

Below are the advantages of investing in Eurobonds notes:
 Eurobonds are form of insurance against Naira depreciation
 Nigerian Corporate issued Eurobonds earn high returns to investors, almost comparable to local currency fixed income instruments.
 Eurobonds offer investors the benefit of portfolio diversification
 The yield on such bonds improved further in comparison if the local currency devalues.
 It offers stability of returns especially if held till maturity date.
 It offers guaranteed foreign exchange income at period intervals.
 There is a high prospect of capital gains if rates drop below the offer rate.
 Our relatively minimum transaction volume offers retail investors opportunity to invest in Eurobonds
 The bonds give an investor a possibility of achieving a higher yield on investments as compare to investing in equities/shares (YTD Return was (19.586%), as at November 11, 2014), bank and building society accounts, money market placements, etc.
 The risk of depreciation of principal amount is eliminated if held to maturity

Conclusion
I do not foresee any near-term appreciation of the naira against the green back as oil price may remain below $90 per barrel with inter-bank exchange rate already depreciating. If this trend is sustained beyond 2015, then naira could shed more than 6% to a dollar.

Some primary market local bonds are currently available. Some secondary market local and Eurobonds can also be bought through informed market players like moi . They are scare but available. The coupon rate/yield on these bonds ranges between 13% to 16%. Where in the world can you get such fixed-income returns? Only in Nigeria!

Do have a great investing future!!
Ayo