Some of the reforms done by Olayemi Cardoso, Central Bank of Nigeria (CBN) governor, have started paying off as foreign investors take a bet on Nigeria in 2025. In an investors’ call with a reputable international bank with large exposure to Africa, senior bank officials said that the lender’s strategy in 2025 is a big ‘buy Nigeria.’ “Sell everything and buy Nigeria, everything,” a senior bank official said....Read Full Article >>➤
The confidence in the Nigerian market started when the CBN began pushing through long-awaited reforms in the foreign exchange (FX) market.
These reforms include a more transparent pricing for the dollar through the introduction of Electronic Foreign Exchange Matching System (EFEMS) launched in December last year and higher interest rates on treasury bills.
The policy on treasury bills has attracted dollar inflows and helped to stabilise the naira after a period of turbulence.
Also, many foreign investors and international banks have regained confidence in Nigerian securities as naira’s volatility is gradually being subdued by the transparency and efficiency in the market.
In addition to introducing better transparency around pricing in the official market and increasing market interest rates, the CBN also asked banks to offload excess dollars, removing the cap on transactions done by International Money Transfer Operators (IMTOs) to lure in diaspora dollars.
The naira hit an eight-month high of 1474.78/$ at the official foreign exchange on Friday.
This stability is music to ears of foreign investors and local manufacturers who have been hard hit by naira volatility in recent years.
Alongside a more stable currency, market rates have been on a rise since last year with the one-year treasury bills now yielding 27 percent. Seven- and 10-year bonds sold at a rate of around 22.50 percent at an auction last week. This trend is projected to continue in the first half of this year.
J.P. Morgan in its recent report titled, ‘Emerging Market Frontier Local Markets Compass,’ stated that the reforms in Nigeria have made its securities more attractive.
“We stay long Nigeria T-bills, as reform momentum has started to bear fruit,” the report stated.
It said that Nigeria’s T-bill trade is more about taking a view on the naira.
“We expect that the naira will perform well this year. Nigeria naira has already started the year as one of the best performers within frontier,” it stated in the report.
Many local analysts expect that this raft of reforms might create a leeway for the readmission of Nigeria bonds into the JPMorgan Government Bond Index-Emerging Markets (GBI-EM).
The GBI-EM indices are comprehensive emerging market debt benchmarks that track local currency bonds issued by the emerging markets. Some of the countries include: Brazil, Thailand, Turkey, Peru and South Africa.
In 2015, the Nigerian government bond was yanked off the index after a series of administrative measures by the CBN that impeded the ability of foreign investors to replicate Nigeria’s weight in the GBI-EM suite of indices. This included the cancellation of the weekly CBN dollar auction.
Sources familiar with the matter said that getting back on the JP-Morgan index depends on demand from investors.
“There’s not enough demand for it at the moment, but it’s there. Everything that needs to be done, on Nigeria’s part, has been done. It is now up to investors,” the source familiar with the matter told BusinessDay.
In the past months, Nigeria has seen a series of visits from international banks, including JP Morgan, with a large entourage.
“All are coming in January because Nigeria is now an important part of their plans. For most, it’s their first time in five years,” another source told BusinessDay.
“They came this time last year to get a sense of the direction of travel. Promises made were kept, so they invested and made money. They borrowed at five percent and made 20 percent returns with FX stable. This is at around the same price they came in a year ago,” the second source said.
BusinessDay understands that a major investment, potentially reaching $1 billion, was made by an investor who came in recently. ...Read Full Article >>➤
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