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Foreign investors reduce exposure to Nigerian risk — Report

By BusinessNews Staff on March 9, 2014

Foreigners stayed away from the Federal Government’s latest Treasury bill auction, the first since the suspension of the Governor, Central Bank of Nigeria, Mr. Lamido Sanusi, in a sign that investor confidence is yet to recover after the banker’s removal.

The government offered N180bn ($1.1bn) in Treasury bills on Wednesday, with a similar amount maturing this week.

It sold N275.09bn, with yields on the 182- and 364-day papers rising further above 13 per cent, the CBN said on Thursday.

Traders said foreign buyers remained on the sidelines and demand was dominated by less risk-averse local investors drawn by the attractive yields, according to Reuters

Foreign participation was “very marginal,” said one analyst. “It’s probably that as those bills mature some international investors won’t roll over the position in the new auctions, so they’ll just take their foreign exchange and leave,” he said, asking not to be named.

Further debt redemptions of at least N320bn are expected in the country this month, providing a barometer of foreign investor sentiment since February 20 when President Goodluck Jonathan suspended Sanusi, citing “acts of financial recklessness”.

Many saw the suspension as an act of political revenge by the president, who removed an outspoken critic of his government’s record on corruption in Africa’s top oil producer.

Offshore investors had been pulling back from the country before Sanusi’s suspension amid a broader retreat from emerging markets. But the president’s action further undermined faith in policy stability in Africa’s second-biggest economy at a time of heightened uncertainty before elections in February next year.

Sanusi had been due to step down in June. Jonathan has nominated the Managing Director of Zenith Bank Plc, Godwin Emefiele, as his successor.

With more debt due to mature in the weeks ahead and limited liquidity in the secondary market, more outflows are likely this month as investors await the return of their money, said Ayo Salami, Chief Investment Officer of asset manager Duet Group’s Africa Opportunities Fund.

[Punch]

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