Business
Naira Strengthens As Investors Buy Nigerian Debt
The naira strengthened, barring a weekly loss, as foreign investors brought dollars into the country to buy Nigerian debt after sales this week.
The currency of Africa’s biggest oil producer gained 0.2 per cent at N157.2 against the dollar in Lagos, the commercial capital. The naira has depreciated less than 0.1 per cent this week, according to data compiled by Bloomberg.
The Governor, Central Bank of Nigeria, Mr. Lamido Sanusi, said relative stability in the currency might be attributed to more foreign exchange from oil companies and investor inflows.
The bank kept its benchmark interest rate unchanged at a record high 12 per cent for an eighth monetary policy meeting on January 21.
“This week we have again seen the strength of investor demand for naira debt instruments,” analysts at FBN Capital Limited, Gregory Kronsten and Olubunmi Asaolu, said in a statement.
“Nigeria has become a favourite of the offshore fixed-income investor despite the yield compression of about 500 basis points on Federal Government naira bonds since August.
“We see another 100 basis points in the next three months, and single digits by year-end,” the statement added.
Nigeria’s Debt Management Office (DMO) sold N110bn in bonds on January 23, with yields on January 2022 notes declining to a record low of 11.34 per cent.
The central bank sold N164.8bn of treasury bills the same day, with demand at double the supply.
The inflation rate will be slower in 2013 compared with last year and may be close to 10 per cent in January, Sanusi said in a recent interview at the World Economic Forum in Davos, Switzerland.
Inflation in December eased to 12 per cent, from 12.3 per cent in the previous month, as the effects of flooding that damaged agricultural output last year began to subside.
The yield on Nigeria’s 16.39 per cent domestic bonds due January 2022 rose seven basis points, or 0.07 percentage point, to 11.3 per cent in the secondary market, according to January 23 data on the Financial Markets Dealers Association website.
The yield on $500m of Eurobonds due January 2021 was little changed at 3.765 per cent on Friday.
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