Naira's Instability Stalls Foreign Investors' Move Into Securities Market

Foreign portfolio investors eager to throw in cash into Nigeria’s fixed income securities market have stalled investment plans on the hopes that naira will get a boost as well as a move back to a price-driven forex trading platform.

 

 

 

It was gathered that foreign investors are also concerned that the Central Bank of Nigeria (CBN) may further devalue the naira.

 

Analysts predicted a further devaluation of naira in order to reflect what they described as the $4.5 billion fall in Nigeria’s forex reserves and also strike out the possibility of easing monetary policy in 2015.

 

The CBN had in February devalued the naira and also scrapped the Retail Dutch Auction System (RDAS) of the forex market. At the last monetary policy committee meeting, the cash reserves requirements for both public and private sector deposits were harmonised at 31 per cent.

 

However, speaking on the expectations of foreign investors following a recent meeting between the central bank and forex dealers, London-based Fixed Income, Currencies and Commodities (FICC) analyst for Africa at Standard Chartered Bank, Samir Gadio said that investors eagerness to come into the market are deterred by the exchange rate level.

“Their fear is that if they invest in local bonds or bills now, there is a high risk that their returns will erode when the currency is devalued further”, Gadio said.