In the first five months of 2024, Nigeria’s money market funds saw a significant increase of 14%, driven by investors’ strong preference for low-risk, short-term investment vehicles, according to a Coronation Research weekly update.
The report highlighted a transformation in naira-fixed income yields over the past year, with Treasury bills issued at the Central Bank’s auctions consistently rising. This trend has also led to a 7% rise in naira-denominated mutual funds. Guy Czartoryski, Head of Research at Coronation Merchant Bank, noted that the majority of money invested in these funds has been used to purchase high-yielding T-bills, positively influencing the yields of other securities and deposits.
Czartoryski provided detailed insights, stating that the average yield for 91-day T-bills at auctions this year has been 15.0% annualized, compared to an average of 5.2% in 2023. Similarly, the average yield for 1-year T-bills has risen to 23.3% from 13.3% in 2023. He emphasized that historically high market interest rates have been beneficial for money market funds, which make up 63% of Nigeria’s naira-denominated assets under management (AUM).
Gbemisola Adeloikiki, a research analyst at Coronation Securities, pointed out that money market fund yields do not immediately adjust to match T-bill rates due to the presence of older T-bills with lower yields. However, as these mature and are replaced by higher-yielding T-bills, the yields of money market funds are set to improve.
Source: The Sun