The Managing Director and Chief Executive of FSDH Merchant Bank Limited, Mr. Rilwan Belo-Osagie has said unless rates are lowered, companies would not be encouraged to raise funds through corporate bonds.
Belo-Osagie noted this while speaking with journalists at the unveiling of the newly licensed merchant bank in Lagos. According to him, the level of corporate bond issuance dropped due to the high interest rates in the country.
“Initially there were few companies that issued corporate bonds but most companies stopped and the reason they stopped was that the interest rates are pretty high and then that discouraged people from doing corporate bonds. I believe when rates are low more corporations would raise bonds” he explained.
The FSDH Merchant Bank MD furthered that the illiquid nature of the corporate bond market is also another discouraging factor in the corporate bonds market, noting that “if we are able to trade on corporate bonds that would encourage more people to invest in corporate bonds. At the moment the corporate bond market is very illiquid, but we hope that with time they would become more liquid and would be traded just as government bonds are traded.”
Speaking on the future of the newly evolved FSDH Merchant Bank, Belo-Osagie explained that the company went into merchant banking so as to be able to offer its clientele a wider range of service. “As a merchant bank we can offer our clients a broader range of services, we are more relevant to our clients. As discount house we couldn’t do any foreign exchange business, we couldn’t do trade in foreign currency securities, we couldn’t also offer term loans and give advances, those are basically the things that we can do now that we couldn’t do as a discount house.”
He, however, stated that the bank plans to remain a merchant bank saying “we will strictly remain a merchant bank; that is our business. Going into merchant banking was appropriate for us because we believe that the experience that we have gathered over the years as a discount house would be an advantage to us as a merchant bank and not a commercial bank.”
FSDH (First Securities Discount House) Merchant Bank Limited, one of the two merchant banks licensed by the Central Bank of Nigeria (CBN) late last year, formally opened its doors on January 15, 2013.