Following a slowdown in reforms, Nigeria is back on the radar of foreign investors. The Central Bank of Nigeria’s decision to raise market interest rates to match inflation and address the foreign exchange backlog has restored confidence. The one-year OMO bill recently sold at 21%, double the previous year’s return. This, along with other measures, is making Nigeria attractive again, especially to risk-taking investors.
Key Points:
- Nigeria’s economic reforms are reigniting interest from foreign investors after a brief slowdown.
- The Central Bank of Nigeria (CBN) has allowed a rise in market interest rates to align with inflation, and efforts to clear the foreign exchange backlog are underway.
- The one-year OMO bill recently sold at 21%, marking a significant increase from the previous year’s return of 12%.
- The yield on the one-year Treasury bill has also doubled from 6.2% in June when President Bola Tinubu assumed office to 13.5%.
- American bank JP Morgan notes that the naira is now considered more attractive for investment due to elevated carry, though they remain cautious and await better visibility on FX inflows.
- Nigeria’s headline inflation is at an 18-year high of 26.7% as of September, which further supports the rise in market rates.
- Efforts to clear the backlog of unmet foreign exchange demand are boosting investor sentiment.
- The CBN has cleared outstanding matured FX forwards owed to some banks, including Citigroup, Standard Chartered, and Stanbic IBTC.
- Nigeria aims to secure around $10 billion in new inflows to clear the outstanding FX backlog.
Impact: The resurgence of interest from foreign investors indicates growing confidence in Nigeria’s economic reforms. The rise in market rates and efforts to address the foreign exchange backlog are seen as positive steps. Sustaining these measures and attracting new inflows will be crucial for maintaining this positive momentum.
