The federal government 25th Development Loan has been put at N180 million and will be solely used for agriculture development.
This is a departure from the usual directive which the federal government had been giving states on development stock which were only to be used for industrial development.
Official of Central Bank of Nigeria, CBN, have already been work on preparation of applications to be forwarded to Nigeria Stock Exchange and Securities and Exchange Commission, SEC.
Financial authorities disclosed that work on the coupon rates to be requested is still preliminary but hinted that the tranches may go at rates around 15 per cent.
The sources dismissed any likelihood of rates going up to 20 per cent, noting that federal government stocks have an in-built incentives of being tax free.
However, financial experts opine that with the cost of borrowing from commercial banks rising quite high, potential subscribers would find it difficult to borrow from banks for the purpose of buying government stocks, if the coupon rate is not close to 19 per cent.
Experts also pointed out that the 1987 budget provision of the rte of credit expansion to the public sector of 4 per cent was based on the suspension of the 25th development loan stock.
Government therefore might exceed the target rate of credit expansion when it goes ahead to float another development loan stock without a supplementary budget.
However, the thinking in the financial circles is that with properly worked out coupon rates and considerably short maturity periods, 25th development loan stock will help attract funds to the capital market which would have gone to high yielding money market.
However, with the value of portfolio holdings, as a result of the revaluation of government stock last week, experts expect over subscription for the stock as institutional investors would want to beef up this portfolios.
In an event of over subscription CBN sources said that federal government might not call for supplementary offer as it did previously, in check of inflation tendencies. Both 23rd and 24th development stocks each initially floated for N300 million, had been oversubscribed. Federal government had asked for supplementary offers, leveling each stock at N600 million.
Also the question of the nominal value to be adopted in the wake of the recent undervaluation of federal government stock could not be answered, as the chief executive of SEC, Mr. George Akhamiokhor could not be reached for comments by the press time.
Though all the 24 federal government stocks were listed at N100 non sells for up to that price. The highest selling stock was quoted at N97.87 on Tuesday. This was the 22nd Federal government stock maturing next year, with a coupon rate of 9.0 er cent. The least selling stock, the 6.0 per cent, December 16 stock was quoted at N63.97 same day.
Equally, being debated is the question of her many tranches and maturity periods the stock will adopt. Lower value and earlier stock floated by the government had mostly adopted two tranches.
The first 17 government stocks were each, in two tranches. 18the and 19 stocks were in three tranches each, while 20 to 24.
The director general of the Nigerian Stock Exchange, Mr. Hayford Alile told The Republic that NSE has been intimated of the stock and is awaiting application. The stock is expected to be floated on the last quarter of the year which means that federal government will have to elect new government brokers from the 27 brokerage firm operating in Nigeria.
