3 days ago
Global investors scramble for Nigerian assets
Global investors are show- ing more interest in Nige- rian assets due to improv- ing economic indicators. Already, Nigeria's sovereign risk spread has fallen to the lowest level since January 2020, erasing the premium accumulated during the pandemic and subsequent strain on its economy.
While US President Donald Trump's widening trade war has taken emerging markets on a wild ride, Nigeria has quietly held its own, attracting foreign capital reassured by currency reforms and other measures designed to revive the economy of Africa's most-populous nation.
'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, lee- way for investors to repatriate their profit, and the stable naira.
'We feel the Central Bank of Nigeria will continue to stem any sharp appre- ciation of the naira to limit profit-tak- ing from the fast money community,' Akcakmak said.
'Portfolio inflows have likely been supported by improved confidence amid key structural reforms, better FX mar- ket functioning and moderating dollar- naira volatility, as well as the still-robust nominal yield buffer,' 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 added.
Yields on Nigeria's $1.5bn Eurobond due in 2034 have declined to 9.69%, 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% versus 22.65%.
Ike Chioke, managing director, Afrin- vest West Africa Limited, said the liquidity supply boost provided by Nigeria's suc- cessful pricing of $2.2bn in Eurobonds significantly strengthened the exchange rate position against the dollar.
'We anticipate the naira will regain more ground against the dollar, driv- en by the aforementioned factors,' he said.
He listed other key policies of the apex bank that supported the naira rally as the clearance of the $7bn FX backlog and the resumed sales of Open Market Operation (OMO) bills to Foreign Portfolio Investors (FPIs) at market-reflective rates.
The CBN's policies, including the ex- change rate unification, have led to sig- nificant foreign capital inflows to the economy while reducing its intervention in the forex market.
The flotation of the naira and the clearing of the over-$7bn FX backlog im- proved the country's outlook with foreign investors as well as multilateral organisa- tions, with the World Bank describing this as a case of bold intervention to improve the economy's sustainability in the long run.
Nigeria's economy – is the pain over?
Bismarck Rewane, managing director of Financial Derivatives Company Ltd, believes the economy has begun to re- cover from the toughest phase of its reform adjustments. He emphasised the importance of strategic policy implemen- tation.
Rewane noted that while the funda- mentals of Nigeria's exchange rate in- dicate that the naira should be stronger, achieving stability depends on an effi- cient and effectively managed FX system. He stressed that the primary challenge lies not in the reforms themselves but in their management, citing poorly sequenced policy changes and insufficient structural reforms as significant obstacles.
He underlined the critical role of in- vestment in driving economic growth. 'Revenue alone is not enough,' Rewane stated. 'Investment is key, but it will be influenced by confidence, transparency, and the right policies.'
He also called attention to persistent challenges such as power supply inef- ficiencies and the lack of transparency in the oil and gas sector, which require im- mediate attention through structural re- forms.
Rewane said that 2025 is going to be less hard, less painful, less difficult than last year. He said the fact that things were so difficult in 2024, does not in any way indicate that the difficulties will persist this year.
Yemi Sadiku, executive director of Par-thian Group, highlighted the need for an enabling environment to attract infra- structure investment, urging the gov- ernment to create policies that encourage private sector participation.
Olusegun Alebiosu, Chief Executive Of- ficer, FirstBank Group, said the improving government revenues, better revenue-to- debt service ratio at 68% and the growth in foreign reserve balances to over $40bn, represent positive indicators for the econ- omy.
He further said: 'Early signs such as the stability that characterised the forex mar- ket after the introduction of the electronic foreign exchange matching system; the emergence of competition on the supply side of our nation's downstream sector that is leading to falling prices in premium motor spirit (PMS); and the coming back on stream of the Port Harcourt & Warri refineries are indicative that there is, in- deed, light at the end of the tunnel for us as a country.'
Alebiosu said the sheer timing of the emergence of these developments has strengthened optimism about the Nige- rian economy.
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