“Sell Everything and Buy Nigeria”: Experts Speak on Nigeria’s Naira Assets

• Some of the Central Bank of Nigeria governor Olayemi Cardoso's policies are starting to show results
• Following the CBN's implementation of reforms in the FX market, the Nigerian market began to stabilize
• The lender's 2025 objective is a big "buy Nigeria" strategy, according to senior bank officials during an investor call

Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.

As foreign investors place bets on Nigeria in 2025, some of the reforms implemented by Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), are beginning to pay off.

Senior bank officials stated that the lender's 2025 plan is a massive "buy Nigeria" on an investor call with a respectable international bank that has significant exposure to Africa, BusinessDay reported.

“Sell everything and buy Nigeria, everything,” a senior bank official said.

The Nigerian market gained confidence when the CBN started enacting long-awaited reforms in the foreign exchange (FX) market.

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Policy changes improves naira

These changes include increased interest rates on Treasury bills and more transparent dollar pricing thanks to the Electronic Foreign Exchange Matching System (EFEMS), which was introduced in December of last year.

The treasury bill strategy has drawn dollar inflows and contributed to the naira's stabilization following a period of volatility.

Additionally, as the market's efficiency and transparency steadily reduce the volatility of the naira, many foreign banks and investors have restored faith in Nigerian assets.

Along with raising market interest rates and improving pricing transparency in the official market, the CBN also requested banks to sell off excess dollars and lifted the cap on transactions made by International Money Transfer Operators (IMTOs) in an effort to attract diaspora money.

At the official foreign exchange on Friday, the naira reached an eight-month high of 1474.78/$.

For local manufacturers and foreign investors who have been severely impacted by the naira's recent volatility, this steadiness is welcome.

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Since last year, market rates have increased in tandem with a more stable currency; the yield on one-year Treasury bonds is currently 27%. At an auction last week, bonds with maturities of seven and ten years sold at a rate of about 22.50 percent. It is anticipated that for the first half of this year, this tendency will continue.

According to J.P. Morgan's recent research,

"Emerging Market Frontier Local Markets Compass," Nigerian securities have become more appealing as a result of the country's reforms.

“We stay long Nigeria T-bills, as reform momentum has started to bear fruit,” the report stated.

It stated that adopting a stance on the naira is the main goal of Nigeria's T-bill trade.

“We expect that the naira will perform well this year. Nigeria naira has already started the year as one of the best performers within frontier,” it stated in the report.

Numerous local analysts anticipate that this set of measures may allow Nigerian bonds to be re-admitted to the JPMorgan Government Bond Index-Emerging Markets (GBI-EM).

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Local currency bonds issued by emerging markets are tracked by the GBI-EM indices, which are comprehensive benchmarks for emerging market debt. Brazil, Thailand, Turkey, Peru, and South Africa are a few of these nations.

Following a number of administrative actions taken by the CBN in 2015, the Nigerian government bond was removed from the index, making it more difficult for international investors to replicate Nigeria's weight in the GBI-EM suite of indices. Among other things, the weekly CBN dollar sale was canceled.

According to people with knowledge of the situation, investor demand will determine if the JP-Morgan index returns.

“There’s not enough demand for it at the moment, but it’s there. Everything that needs to be done, on Nigeria’s part, has been done. It is now up to investors,” the source familiar with the matter told BusinessDay.

International banks, including JP Morgan, have visited Nigeria several times in recent months with sizable entourages.

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“All are coming in January because Nigeria is now an important part of their plans. For most, it’s their first time in five years,” another source told BusinessDay.

“They came this time last year to get a sense of the direction of travel. Promises made were kept, so they invested and made money. They borrowed at five percent and made 20 percent returns with FX stable. This is at around the same price they came in a year ago,” the second source said.

CBN Approves Another Currency for Export Repatriation Proceeds

Legit.ng reported that the CFA franc may now be recorded on the Nigeria Export Proceeds (NXP) form for the repatriation of export earnings, the Central Bank of Nigeria (CBN) has stated.

The Nigeria Export Promotion Council's (NEPC) executive director, Nonye Ayeni, addressed reporters on Friday about the country's non-oil export results for 2024 in Abuja.

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Export earnings are the proceeds that Nigerian exporters get from the sale of their goods overseas.

Source: Legit.ng