Foreign capital inflows still driving reserves accretion

The increases in the foreign reserves continued last week based on sustained foreign capital inflows into the fixed income market.

Available records show that these inflows are on the back of the attractive yields in the fixed income market which have become more attractive as political risks have abated following the conclusion of the 2019 general elections.

Hence, the reserves levels were further up $520.3 million from $43.0 billion on March 14, 2019 to $43.5 billion by March 20, 2019. Similarly, liquidity levels in the foreign exchange market have remained elevated, prompting the Central Bank of Nigeria (CBN) to halt its weekly interventions into the foreign exchange market while rates have remained stable within tight bands dealers said.

“We note continued investor interest on open futures contract with tenors ranging from eight to12 months which may indicate hedged positions taken by foreign investors in the fixed income market,” Some Lagos-based investment banking firms agreed in their weekly market assessment.

• EU to Buhari: Your inclusive government offer will move Nigeria forward

Data from the Central Bank of Nigeria show that Nigeria’s external reserves increased by $977.6 million to $43.5 billion between February and March 2019.

It should be remembered that upon the conclusion of the Presidential election in February 2018, political risks have receded.

The Central Bank Governor (CBN) – Godwin Emefiele – estimated that since the conclusion of elections in February, inflow of over $6.0 billion have been recorded in the naira bond market.

There are indications that a stable political environment and accommodative monetary policy have renewed foreign investor’s interest in the Nigerian market, with the money market as destination.

Post-elections, yields have moderated by 47 basis points (bps) and activity level in the I&E Window between February and March till date has strengthened by 11.3 per cent.

Other market analysts said Nigerian sovereign yield on bonds is considered relatively attractive and has driven increased capital flows into the country.