Saturday, 24 June 2023 02:47

Foreign Investors lose interest in buying Nigeria’s Naira bonds, treasury bills for this one reason

Rate this item
(0 votes)

Nigeria’s naira bonds and treasury bills, priced in the local currency, are turning out to be something investors from abroad want to stay away from as the country’s high inflation makes the yields on those assets unattractive for them.

At 22.4 per cent, price levels in Africa’s biggest economy increased to their highest levels in nearly two decades last month, outrunning rates at which such securities are priced so much that returns on them will have been much eroded by the time they fall due.

That has made their real yields negative, and foreign investors want notes to be priced higher to make up for inflation’s adverse impact.

Bloomberg cited a London-based institutional investor on Thursday as saying only rates in the 15-20 per cent band could tempt it to plough money into naira-denominated securities. An analyst at another told the news outlet that treasury bills’ yields need to really reflect the monetary policy rate to encourage foreigners to invest in the local debt market.

The circumstances are being complicated by Nigeria’s ongoing currency overhaul, which has collapsed its numerous exchange rates into a single reference rate and helped bridge the gulf between the parallel and official rates.

Removing that spread, which was as wide as 60 per cent before the new reforms, implies foreign investors looking to invest in naira bonds and T-Bills have to pay that percentage more to do so since they have to convert their capital into the local currency to make that happen.

Yet, the trend is a departure from Nigeria’s Eurobonds, which this month quickened to a 5-month high, after considerable interest from investors excited about the foreign exchange revamp.

“We’ve benefited from a big rally on the Eurobonds as spreads have declined by over 200 basis points,” Kevin Daly of London’s Abrdn Investments Limited told Bloomberg.

“We expect spreads to compress further.”

His firm offloaded its investment in Nigeria’s T-bills three years ago following policies pegging the exchange rate and introducing capital controls.

Daly said Abrdn will be willing to reinvest when rates reach between 15-20 per cent and the local currency steady in the neighbourhood of 750 to a dollar.

“T-bill yields may have to rise to re-establish the policy rate as the anchor for interest rates before foreign portfolio investors can be confident to reengage with Nigeria,” Ayo Salami, chief investment officer of an asset management company in London, told the news outlet.

His company, Emerging Markets Investment Management Limited, controls around $40 million in investment in Nigeria’s bonds and stocks.

Unless Salami “sees a genuine willing buyer, willing seller foreign currency market,” he is not prepared to invest in Nigeria, his company having been forced to cut back its activities in Nigeria after the previous government introduced foreign exchange curbs.

 

PT

June 30, 2025

Nigerian Bond Market extends gains as yields fall to 18.38%

Nigeria’s sovereign debt market maintained its upward trajectory last week, with continued investor interest driving…
June 26, 2025

Peter Obi decries ‘coordinated lawlessness’ after brother’s property is demolished in Lagos without court order

Former presidential candidate Peter Obi has condemned what he described as a brazen act of…
June 28, 2025

7 genius responses to ‘put rude people in their place,’ according to communication experts

Kathy & Ross Petras Rude people are, sadly, all around us. We deal with them…
June 21, 2025

Man convicted of posing as flight attendant to fly for free 120 times

A 35-year-old American man has been found guilty of impersonating a flight attendant at least…
June 30, 2025

Bandits strike again in Benue, kill four policemen in fresh attacks

Armed bandits on Sunday launched another deadly assault on Benue State, killing at least four…
June 30, 2025

What to know after Day 1222 of Russia-Ukraine war

WESTERN PERSPECTIVE Ukraine F-16 pilot killed in large-scale Russian attack, Zelenskiy calls for US help…
June 30, 2025

The computer-science bubble is bursting

Rose Horowitch The job of the future might already be past its prime. For years,…
May 13, 2025

Nigeria's Flying Eagles qualify for World Cup after dramatic win over Senegal

Nigeria's U-20 national football team, the Flying Eagles, have secured their place at the 2025…

NEWSSCROLL TEAM: 'Sina Kawonise: Publisher/Editor-in-Chief; Afolabi Ajibola: IT Manager;
Contact Us: [email protected] Tel/WhatsApp: +234 811 395 4049

Copyright © 2015 - 2025 NewsScroll. All rights reserved.