Global investors scramble for Nigerian assets over reforms benefits
Investors across the globe are swooping on Nigerian assets as the impact of the Central Bank of Nigeria (CBN) reforms in the financial sector spreads to key sectors of the economy. Nigeria is finally getting a favourable nod from investors, pushing stocks higher and bond yields lower as painful reforms restore confidence, writes Assistant Editor, COLLINS NWEZE
Global investors are increasingly drawn to Nigerian assets as the country’s economic indicators continue to improve. Nigeria’s sovereign risk spread has significantly decreased, reaching its lowest point since January 2020. This marks the successful elimination of the premium that had built up during the pandemic and the subsequent economic challenges.
Despite the volatility caused by the U.S. President Donald Trump’s escalating trade war, which has sent emerging markets on a turbulent path, Nigeria has managed to remain resilient. The country has attracted a steady influx of foreign capital, bolstered by comprehensive currency reforms and a series of measures aimed at revitalizing Africa’s most populous nation’s economy.
“Nigeria appears to be back in business as long-awaited economic reforms take shape,” said Emre Akcakmak, portfolio manager at East Capital. Key measures include improved currency liquidity, leeway for investors to repatriate their profit, and the stable naira. “We feel the Central Bank of Nigeria will continue to stem any sharp appreciation of the naira to limit profit taking from the fast money community,” Akcakmak said.
“Portfolio inflows have likely been supported by improved confidence amid key structural reforms, better FX market functioning and moderating dollar-naira volatility, as well as the still-robust nominal yield buffer,” said Samir Gadio, head of Africa strategy at Standard Chartered Plc told Bloomberg. “Besides, Nigeria’s local market is seen as less correlated with global risk conditions than more liquid EM peers,” he said.
Yields on Nigeria’s $1.5 billion Eurobond due in 2034 have declined to 9.69 per cent, the lowest since its early December launch, and a domestic debt auction was three-times oversubscribed recently, with the Open Market Operation bills allotted at 21.45 per cent versus 22.65 per cent.
Exchange rate stability
The naira broke key resistance levels at the Nigerian Autonomous Foreign Exchange Market as the Central Bank of Nigeria (CBN) began the implementation of the new Electronic Foreign Exchange Matching System (EFEMS). The platform, addresses long-standing issues of market opacity and inefficiency by facilitating smooth trading and consistency among participants.
In the currency market, the naira appreciated against the dollar across all segments. CBN Governor, Olayemi Cardoso, had at the 2024 Chartered Institute of Bankers of Nigeria (CIBN) dinner held November 29 in Lagos, expressed strong optimism that measures being deployed by his administration will deliver benefits that would be felt by every Nigerian in no distant time. He said the need for reassurance on the expected outcomes from policy measures being deployed by the CBN was necessitated by the growing pains of Nigerians due to the further deterioration of key macroeconomic variables (notably, inflation and exchange rate) that are within the purview of the monetary policy authority relative to when he assumed office last year September.
Credit:
0 Comments