Foreign investors are coming back for government securities, after a hike in benchmark interest rates and reforms by the Nigerian Central Bank (CBN).
According to sources, a greater percentage of these investors are interested in Open Market Operations (OMO) and treasury bills auctions. These foreign investors provide the needed liquidity in the market, making trade opportunities in Nigeria profitably attractive again.
Currently, there has been an uptick of foreign portfolio investors in the market previously dominated by local investors for the past seven years. Foreign Portfolio Investments saw significant growth over a month.
At the start of January 2024, foreign portfolio investments were at ₦53.11 billion ($39.13 million), eventually seeing a 23% increase to ₦65.81 billion ($42.61 million) in February.
According to Ayodeji Ebo, who is the Chief Business Officer at Optimus by Afrivest, the higher interest rates “will attract foreign investor participation, which could stabilize the Naira woes.”
In a hostile move to contain the overwhelming inflation in Nigeria, the CBN has raised the interest rates to a 10-year high of 24.75%. According to the CBN Governor, during the recent rate hike meeting, the MPC will continue raising the rate, hoping to die down the nation’s inflation below 30%.
This continuous rate hike is attracting more investors to the country, at the same time, hurting businesses in the country.
“The flocking of foreign investors in the Nigerian stock market will provide the required capital for the banks’ recapitalization even if for a short period,” says Ebo.
To ensure the stability of the financial system, CBN earlier last week directed all banks operating in Nigeria on a recapitalization drive to increase their minimum capital requirements within 2 years.
