IIARD International Institute of Academic Research and Development

IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH (IJBFR )

E-ISSN 2695-1886
P-ISSN 2672-4979
VOL. 10 NO. 5 2024
DOI: 10.56201/ijbfr.v10.no5.2024.pg25.47

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Risk and Yield on Government Savings Bonds in Nigeria. A Time Series Study

Abel H’sown Iyeneomie and Lucky Anyike Lucky

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Abstract

This study examined the effect of risk on Government Savings Bonds in Nigeria. Time series data were sourced from Central Bank of Nigeria Statistical bulletin, publications of Nigeria Bureau of Statistics and Nigeria debt management office. Yield on saving government bond was modeled as the function of Liquidity risk measured by variation in rate of money supply, Interest rate risk measured by variation in real interest rate, Exchange rate risk measured by variation in exchange rate of Naira per US Dollar and Default risk measured by anticipated return on a bond minus the return a similar risk-free investment would offer. Ordinary least square methods of cointegration, granger causality test, unit root test and Vector error correction model. The study found that 69.4 variations in federal government savings bonds were explained by the variables included in the model. The lag selection validates the application of lag I. at lag I, the study found that the variables are positively related to federal government savings bond. The study conclude that risk determine the yield of bonds in the Nigerian bond market. We recommend that management of the Nigeria bond market should ensure that their security exposures are adequately secured through proper scrutiny of investors in order to risk associated with different bonds in the Nigeria bonds market.

keywords:

Risk, Yield, Government Savings Bonds, Nigeria. Time Series Study

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