The Central Bank of Nigeria (CBN) has disclosed a significant influx of foreign investors into Nigeria’s financial markets, with over 75% of bids received during government securities auctions held on March 1 and 6, 2024, originating from foreign entities. This surge underscores a growing interest in Nigeria’s financial instruments among international investors.
Earlier reports by Nairametrics highlighted the success of the CBN’s Open Market Operations (OMO) auctions on March 1, 2024, where bills worth N1.06 trillion were successfully sold. Subsequently, on March 6, 2024, the apex bank conducted Treasury Bills (T-Bills) auctions, offloading approximately N1.32 trillion.
The robust demand observed during these auctions not only reflects an appetite for Nigerian debt but also signals increasing confidence among foreign investors in the Nigerian economy.
In a statement released by the CBN, it was revealed that heightened investor interest in short-term sovereign debt is fueled by increased foreign exchange (FX) inflows and adjustments to benchmark interest rates. Notably, government securities issuances witnessed overwhelming subscription rates, with foreign investors accounting for over 75% of bids during the auctions conducted on March 1 and 6, 2024.
Furthermore, the CBN reported a substantial surge in foreign inflows in February 2024, attributed to higher remittance payments from Nigerians living abroad and increased purchases of naira assets by foreign portfolio investors. Overseas remittances soared to $1.3 billion in February, compared to $300 million in January. Additionally, foreign investors injected over $1 billion into Nigerian assets last month, pushing total portfolio flows for early 2024 to at least $2.3 billion, surpassing the $3.9 billion recorded for the entire previous year.
The momentum in foreign exchange inflows has continued into March 2024, bolstered by recent adjustments in benchmark interest rates, which have amplified investor interest in short-term sovereign debt.
The strategic objectives outlined by CBN Governor Olayemi Cardoso, aimed at curbing inflation, stabilizing the exchange rate, and fostering confidence in the banking system and overall economy, align with the influx of foreign investors into Nigeria’s debt market. Governor Cardoso seeks to sustain increases in Nigeria’s foreign currency reserves and enhance liquidity in the foreign exchange market, as articulated during last month’s Monetary Policy Committee (MPC) meeting and a conference call with foreign portfolio investors.
Looking ahead, the CBN plans to sell N1.64 trillion in Nigeria Treasury Bills in the second quarter of 2024, between March and May, as part of a refinancing initiative for existing maturing treasury bills of varying tenures, according to the bill issue programme.
Credit: Nairametrics
