Foreign Investors Flock to Naira Assets as Reforms Boost Market Confidence
Recent reforms by the Central Bank of Nigeria (CBN) have spurred increased foreign investor interest in naira assets. The implementation of transparent pricing mechanisms, higher interest rates on treasury bills, and the stabilization of the naira have made Nigerian securities highly attractive. International financial institutions are shifting focus toward Nigeria, with a senior banker advocating a “buy everything Nigeria” approach.
Key measures, including the introduction of the Electronic Foreign Exchange Matching System (EFEMS) and the removal of transaction caps for International Money Transfer Operators (IMTOs), have improved forex market efficiency. The naira recently hit an eight-month high of 1,474.78/$, further strengthening investor confidence. The combination of these reforms has encouraged stability in the currency, easing concerns about past volatility.
Nigerian treasury bills now offer yields of 27% for one-year maturities, while bonds spanning seven to ten years yield approximately 22.50%. These lucrative returns have positioned Nigerian securities as one of the most attractive investments in emerging markets. J.P. Morgan recently highlighted Nigeria’s improving market conditions, ranking the naira among the best-performing frontier currencies.
Market analysts speculate that Nigeria’s ongoing economic reforms could facilitate the country’s return to the JPMorgan Government Bond Index-Emerging Markets (GBI-EM), a significant benchmark for emerging market debt. The index includes economies such as Brazil, Thailand, Turkey, and South Africa. However, reentry largely depends on sustained foreign investor demand.
International banks and investment firms, including J.P. Morgan, have ramped up their presence in Nigeria, signaling strong future commitments. A recent major investment, reportedly worth $1 billion, underscores renewed confidence in Nigeria’s financial markets. With CBN’s policies yielding positive results, foreign investors anticipate continued stability and profitability in naira-denominated assets.
Source: Business day