₦airaland Forum

Good day my brothers and sisters - Can anyone give me a rough estimate of how much it will cost to build a bay warehouse (30m length x 15m width x 7.5m height). It will be a standard rectangular building with aluminum roofing and concrete flooring that can support the storage of agricultural products. The project will be in the outskirts of Abuja.

The numbers do not have to be accurate. I just want to have an idea of what kind of amount I should be looking at. Any help from experts in the house will be appreciated!!

I agree with feelamong and TONY56 and will add some additional thoughts.

The Nigerian government issued a large amount of TB over the last couple of years to support increased government spending which was mechanism to stimulate the economy and bring us out of recession. Since oil prices were low, government had to issue a mix of TB bills (which were very costly at about 17-18% interest) and Eurobonds (much cheaper at about 7%). Now that the price of oil has started to recover (which translates into more money for the government) and the economy is technically out of recession, government will look to phase out high-cost TB borrowings by reducing the amount issued/rolled over.

If these economic indicators continue to be positive, we can expect to see TB rates continue to go down. Investors are trying to lock in higher rates now for a longer term (364 days) as TB rates are expected to continue to decrease in the near term. I personally see rates falling below 10% (for 364 days bills) sometime this year, all things being equal.

Thank you Sir. I've been looking for this for a few weeks now.

feelamong:
2ND QTR TREASURY BILLS CALENDAR....

Prepare for lower discount rates as the FG is redeeming about N500B matured Tbs..

Thanks awesomeJ.

I am not sure why there isn't more transparency from CBN around this though. Let's see what happens.

awesomeJ:
.

The last one I saw was for Q1 2018 and there was only one primary issuance this month. Does anyone have the Q2 2018 calendar yet?

Damolaskynov:
Hello oooooo,

Is Primary auction bidding happening this week? Or when next is that happening ? All the info I've been seeing is for Secondary market sales and maturing TB.

dipoolowoo:
Not yet released. It should be out by next month.

Ok thanks.

Good day all - does anyone have the calendar for Q2 2018 TB issuances? Not sure if it has been released yet.

You are getting 19% because your cash flows are incorrect.

At the time of investment (what you call yr 0, the cash flow if -6,668,000. The upfront interest is already accounted for in that number (i.e. 6,880,000=8,000,000 - (8,000,000* 14% [this is upfront interest]).

At maturity (yr 1), you get the face value of 8,000,000 and not 6,880,000.

If you calculate the IRR based on these cash flows you should get back to the right number.

haibe:
Oh thanks. I see we have a different definition of what effective interest rate is. The 16.2% using that method is simply the current yield and nothing more; its the same as simply dividing the interest over the amount invested. i.e (ROI) (1120/6880).

From my understanding in finance, i will say several factors affect what your effective yield is; the basic one's are the issue price (the 6880k invested), the interest rate of 1120k, the redemption amount of 6880k and more importantly the timing of these cash flows. The fact that interests are paid upfront will significantly affect the yield to maturity/effective yield than if they were paid, say at the end of the first year when the investment matures. The concept of time value of money is very key to determining the yield to maturity and thus will be the reason why i am getting 19% and not 16%. It may be fine to base investment decisions based on current yield like you have done especially if you dont plan to roll over the interest payment/reinvest in a different source ; if you do, then time value of money becomes important and the yield to maturity should be used in making the decision rather than a mere ROI.

Mup4life:
How do one invest in gold and other precious metals?

You can invest in exchange traded funds that invest directly in actual gold or gold stocks. Here is one that used to trade on Nigerian stock exchange from Absa, the South African bank, that buys actual. (Caveat: This is not a recommendation! Just meant to give you an idea of what gold ETFs do).

http://etfcib.absa.co.za/Fund%20Documents/NewGold%2030062017.pdf

One other option I forgot to mention is to convert your cash to other currencies and think about investing in non-naira denominated assets as inflation will result in the naira falling against other currencies.

U1:
Nice point, sir. But no matter how bad it gets, TB will always be better than leaving your money in the bank insofar as you will get your money back.

Agreed. You will essentially be losing money if you leave it in a bank account as the interest you will get will be lower than the inflation rate.

Here are a couple of ways for people in the group to brace for higher inflation:

1. Stay away from long-term fixed income investments - T-bills will be fine because rates will adjust upwards to account for inflation.

2. Real estate is usually the best asset to invest in in times of high inflation, and often sees its greatest price appreciation during such periods.

3. Invest in sectors of the stock market that benefit from inflation including energy/oil, food, building materials etc.

4. Invest in gold and other precious metals.

Other in the group, feel free to add to this!

Kemade2007:
Please explain the implications for Tbill investors

If CBN continues to print large amounts of money to support government borrowing, it will result in even higher levels of inflation. With higher levels of inflation, the real rate of return (nominal rate - inflation rate) will decrease. T-bill rates should adjust to reflect inflation in the medium term so bit better than longer term bonds.

Anyone looking to invest in longer term bonds like the FGN or sukuk bonds need to consider inflation risk before they lock in their funds for the long term.

"Nigeria’s central bank is printing money to keep the government afloat and alarms are ringing"

https://qz.com/1093002/nigerias-central-bank-emefiele-is-printing-naira-to-buhari-government-afloat/

Interesting article I came across which has implications for T-bill investors...

As Feelamong said, it is wise to diversify your assets. We should diversity across asset types such as stocks, bonds (including T-bills and other types if fixed income instruments corporate bonds, commercial paper, CDs etc.) or alternative assets (including real estate and gold/precious metals and other alternatives -bitcoin/crypto-currencies will fall into this bucket). We should also diversity across geographies to guard against the impact of economic risks such as inflation and unfavourable forex movements). If you can get exposure to different assets classes across different geographies and different sectors/industries, then you will be able to reduce the overall risk of your portfolio (i.e. by reducing volatility/fluctuation in the value of your assets).

Olayimikami:
N140000-N200,000

Thank you sir. And keep up the great work.

Great thread. Thank you all.

Does anyone know how much it will cost to hire a 20 ton truck from lafia (or any where in that axis) to lagos?

gabby18:
The last time I did tb was early this year and d rates were as high as 18.5% for about 180days... Was surprised it dropped that way..
Its like fbn quest Money market fund rates (mutual funds) are more appealing at the moment... It hasn't gone below 18% this month of September..it even touched 20% see link below

https://www.fbnquest.com/asset-management/fund-prices/mutual-funds-yield-history/historic-yield---september-2017

We should be careful when we compare T-bills to money market funds (MMF).

The accurate way to compare them from a rate of return perspective is to look at true yield of the T-bill versus the yield of the MMF. A 17% marginal interest rate for a 364-day T-bill equates to a return of ~20.5%.

There is also the issue of different risk profiles between T-bills and MMFs. MMFs invest in short-term government securities such bankers acceptances, commercial paper and CDs in addition to T-bills. These other instruments have higher risk and therefore should provide higher returns to reflect the additional risk.

You have to also consider fees charged by the funds. I think FBN charges 0.75% for their MMF. This will also be a reduction to you return.

Finally, the yields shown on the link are based on historical performance. As T-bill rates decline, this will also result in MMF yield declining as well. The current primary rate reflect the returns investors are going to achieve over the next 90, 180, 364 days (that is they are forward-looking) and not historical like what FBN is presenting.

Ultimately, the return on MMFs will be a bit lower than that of T-bills. If you are a passive investor and don't want to be bothered with managing your T-bill investments and would rather have someone else do it for you, then investing in a MMF is a viable alternative.

awesomeJ:
It just excites me to read great analysis from brilliant minds such as this. Kudos sir.

Thank you sir.

I have learned a lot from many people on this board. Hopefully, some of my perspectives will help others as well.

gbengene05:
For all your import and export of both agro and non - agro products, you can contact Ladere Global Services Ltd, 3, kofo Abayomi avenue, Apapa, Lagos.

Thank you for the recommendation! I appreciate.

Anyone have recommendations?

NL1960:
You have a point. Let us see the rates from other banks as i do not want to believe that the banks have formed a TB Union so as to be bidding at about the same rate.

Who has the rates for GTB and First Bank?.

NL1960, I agree with you that because people are locking down their investments it is pushing the rate lower. Demand and supply in action. If you look at the total subscription (339bn) relative to the amount offered (87bn) you'll see that it was over-subscribed by almost 3 times. That couple with the fact that the low end of the bids went to 17% form 18% is what caused the drop.

I think rates will go down some more before they stabilize as investors continue to push to lock in rates.

unite4real:
You cannot get a true picture with your analysis. DMO and CBN know what they are doing.

First of all, ask yourself what is current rate for 91 day treasury bills. Now what is the coupon period for Savings bond. Its the same period. Savings bond pays coupons every 3 months. If you want to know what rate the savings bond go for, always look at 91 day treasury bills. Its usually around it. If you look at the regular FGN bonds which pay coupons twice in a year, the rate is usually higher than that of savings bond.

Now back to treasury bills. These are happy times for rates because of the bad state of the economy. I encourage anyone to cash in on it for now. The rates cannot continue like this. If you buy a savings bond for 3 years, you are very sure of your interest which is fixed throughout the life of the bond. Treasury bills on the other hand could fluctuate during the same 3 year period. The bill you buy at 18% today may go for 10% after maturity and you want to renew. let me give you a little history

August 2008, 364 day treasury bills was around 9.4%
August 2009, there was no 364 day but 182 days tenor was around 4.5%
August 2010, 364 day tenor treasury bills was between 4% and 4.5%

This is to show you that the rate you see today, you may not see it any more. It could even go higher. One of the essence of buying a bond is to save yourself from the headache of speculating rates fluctuations. With a bond, the rate you tie down is fixed throughout the life span.

If you are a good speculator and you feel that from the year 2018 up until after election year, treasury bills rates will be high, then its time you avoid savings bond. If you think that the rates will go lower below 10%, then its time you lock up a savings bond. If treasury bills rate go to as low as 10%, a savings bond bought then will be even lower. Its all about speculating and getting it right.

if you do a mix of the two, it is better.

You do make a lot of valid points, sir, much of which I agree with. Having a balanced portfolio with mix of short-term T Bill and longer term government bonds is good as you can take advantage of the currently high T Bill rates and also lock in rates for longer terms in the bond market.
I beg to differ on a few things though. The point I made is more specific to the offered interest rate on the 2-year savings bond. I will not speculate on anything more than two years as that is too far out for anyone to predict where rates will go by then.
My view on investing is from a total return perspective so I am less concerned about frequency of interest payments versus my overall return when I compare investment options. As you probably know, total return will take into account different interest payment profiles and allow you compare oranges with oranges.
As I mentioned previously, the true yield on 1-year T Bills will need to about to almost 6.2% when you reinvest on one year for you as an investor to better off from a total return perspective. As you rightly pointed out, you have to go back as far as 2009 and 2010 (the period with the lowest T Bill rates in recent history) to find T Bill true yields below 6%. However, it is important to put this in the context of the economic environment prevailing at the time. The world was witnessing the worst financial crisis of our times which started in 2008 but really reach full scale in 2009 and 2010 and started to ease after that.
As you probably know, deposit and lending rates track the CBN monetary policy rate. Many countries across the globe engaged in large cuts to their benchmark interest rates in order stimulate their economies and keep themselves out of recession. This included us as well. CBN dropped the benchmark monetary policy rate from 10.25% in June 2008 to 6% by July 2009. This type of radical cuts to interest rates only happen in extreme situations. Typically the rates will change by 0.25% to 0.5% every couple of months when the monetary policy team meets. So I take any economic and financial analysis that relies on data from 2008 to 2010 with a grain of salt just given the situation at the time.
Currently, we are not in a period of economic shock so I certainly do not see 1-year T Bill rates going to 6% by this time next year. The benchmark MPR is currently at 14% since July of last year. Even though we were technically in a recession CBN has not cut the rates (likely because inflation is so high). The likelihood of a large cut between now and next year is very, very low.
My point is that I do not view the offered rate on the 2-year savings bong of 13.817% as attractive. I will take my chance with investing in 1-year T Bill because I view the reinvestment risk associated with T Bill rates as low as 6% one year from now as minimal.

Exporters in the house, please comment!! Thank you.

@ GODAKPAN

You will get N370,425 every quarter and your 10m will be returned to you after 3 years.

dipoolowoo:
Sept 2017 FGN Savings Bond Opens Today
https://www.businesspost.ng/2017/09/11/sept-2017-fgn-savings-bond-opens-today/

The DMO and CBN need to do better job at coordinating their issuance strategy.

The interest rates being offered for these bonds are ridiculous relative to what one can get in the T Bills market. Imagine an interest rate of 13.817% for the 2-year bond versus 22% (true yield on 1-year T Bill)? What this effective means is that in order for the 2-year bond to be attractive, you have to believe that the true yield on the 1-year T Bill will have to drop to below 6.22% after one year. The likelihood of this happening is almost non-existent.

Brothers, if you are considering investing in these bonds I urge you to reconsider. We are much better off investing in T-Bills. The only advantage I can see is that the minimum subscription is N1,000. This is a joke.

I have a slightly different view on T Bill rates in the short term. I think some people are overestimating the impact of the hurricane. So far, only about 11 percent of US refining capacity has been impacted. This will only have a temporary impact on oil prices so I while I agree with Alikote's analysis of the impact of higher oil prices on TB, I'm not convinced that oil prices will go up and remain elevates for long.

I do think that T Bill interest rates will remain high for a while until the economy starts to grow again at a brisk rate and the current inverted yield curve is an indication that the economy may not recover for some time to come. The recent dismal subscription of CBN long-term bonds may push the government to increase issuance in the T bills market to generate funds since they cannot obtain them in the bond market. An increase in issuance in the T Bills market will provide support for T Bill rates.

https://www.thisdaylive.com/index.php/2017/09/10/fg-august-n135-billion-bond-fails-with-41-5-subscription/

ihedioramma:
@Freeman67,If i invest one million and
reinvest interest (18%)and principal for ten years how much will i get

You will have about 7.27 million after 10 years assuming you can get 18% eacg t8me you reinvest. The calculation is 1m * (1+21.95%)^10. Here the rate of 21.95% represents the true yield.

In reality, interest rates are at historic highs and will not stay like this for 10 years. So making the assumption that you can reinvest for 10 years at 18% is aggressive.

For reliable freight forwarders this is a good opportunity to establish a business relationship. Let me know if you have experience in agro export.

Good day fellow nairalanders,

Does anyone have recommendations for reliable freight forwarders with experience exporting agricultural products from Nigeria? If so, please recommend. Thanks

freeman67:
"In the event that you have to liquidate this investment prior to the maturity date indicated above, a penal charge will be applied based on the prevalent rediscount rate."

The statement above is the only thing I have always seen on the proof of investment. I believe it depends on individual banks. The first and only time I ever asked for termination before maturity was when I told them to terminate @ before maturity and they forgot and rolled it over. I lose some money back then because it was sold less than the rate they bought it for me.

You can only get the right info if you contact your bank.


However, the penalty is also dependent on if you have collected your interest upfront or you reinvested it.

If you collected the interest upfront it should be about N180,000, If reinvested with the principal it was to come as N220,000.

Now it is just 60 days out of the initial 364 days you signed as contract meaning you have 304 days left. If your bank decides to sell for you @ the rate you got it(18%) it will be either 180000÷364×60 or 220000÷364×60 which will either give you about 29600 or 36200.


So if you collected your interest upfront what you may likely get back is about 849600 if reinvested you may likely get 1036200.

You you don't get confused. This if they succeed in selling and refunding you after the 60 days ooo.

I think that there are two things to consider when making the decision to liquidate.

The first and probably the most important is the prevailing interest rates at the time you wish to liquidate which will determine the rate you are able to sell into the secondary market. T-bill prices (and bond prices overall) move in the opposite direction of interest rates. Think about your initial investment of N1 million...if the interest rate is 18%, assuming you don't reinvest, you are essentially paying 820k to get 1m after one year. If the interest rate was 15%, you would had paid 850k to get 1m after 1 year...so higher price and more expensive for you.

Similarly, if interest rates have gone down when you want to liquidate then your investment is more valuable as you are receiving more cash from the liquidation of your investment. The opposite it true if interest rates have gone up.

The other consideration is the transaction cost of the liquidation or what the bank will charge you for helping you sell you T-bill. This will vary depending on the bank.

freeman67:
How does investment in gold work?

You don't have to buy the actual gold. You can buy an index fund or exchange traded fund that will move the same way as gold prices.