Investors shrug off election risk to buy treasury bills
Foreign investors have shrugged off the risk of forthcoming elections to buy Nigerian Treasury Bills (NTBs), leading to appreciation of the Naira in the foreign exchange market.
At N361 per US dollar yesterday, the local currency rose 0.55 percent during the week against between N362.50 and N363 a week ago on the over-the-counter market.
Foreign investors have been buying one-year NTBs, yielding 15 percent, helping boost dollar liquidity on the currency market, after the Naira touched N365 last month, Reuters reported.
Central Bank of Nigeria (CBN) yesterday auctioned N321 billion of bills, more than it had offered. The apex bank has been selling TBs to lure foreign investors that fled at the start of the cycle of interest rate hikes in United States which hurt the Naira.
“There’s liquidity on the market. We have traded as low as 360.80 naira this week. Foreign investors are coming in. I don’t think they are as concerned with the elections or the premium on yield is good enough,” a trader told Reuters.
Traders say investors have been buying bonds partly to offset lower yields abroad, especially after the US Federal Reserve Bank signaled a dovish stance on rates this year and on the assumption of limited policy changes in Nigeria if Buhari wins re-election.
“If the incumbent wins, status quo could remain and if the main opposition wins, they sound more pro-market, so investors have nothing to lose,” another trader said.
Nigeria has at least three different exchange rates, which CBN has used to manage pressure on the currency.