Race for safe haven persists as investors oversubscribe NTB by N98bn

FOREIGN and domestic investors are seriously chasing Nigeria’s sovereign issues where risk of default is minimal, amidst growing confidence that ongoing macroeconomic reforms would lead to considerable improvements in the medium to long-term.

Specifically, investors oversubscribe Nigerian Treasury Bills (NTBs), by N98billion in the last auction over the week, as they opted for longest-tenored of the three tenors in the latest auction of Nigerian Treasury Bills (NTBs).

The Debt Management Office (DMO) offered and allocated N1 trillion, with total subscriptions amounting to N1.98 trillion. Stop rates for the 91-, 182-, and 364-day papers closed higher compared to previous levels, standing at 17.24 percent, 18.00 percent, and 19.00 percent, respectively, as opposed to 5.00 percent, 7.50 percent, and 11.54 percent at the last auction.

Dealers said Post-auction, yields were repriced across the curve, with notable interest observed in the newly issued 1-year paper (6-Feb-25). As anticipated, the average benchmark yield surged by 512 basis points (bps) , concluding the week at 15.05 percent.

However, amidst a constrained interbank liquidity setting, the Treasury Bills market predominantly witnessed bearish sentiments throughout the week.

This was primarily attributed to the adjustment of the offer amount, which increased from N417 billion to N1 trillion, for the NTB auction conducted within the week.

Similarly, Nigeria’s dollar bonds have also turned into one of the world’s top performers in 2023, with a 25 per cent return. Nigerian equities had also closed the year with average return of 45.90 percent, one of the three highest returns globally.

A Bloomberg report indicated that Nigeria’s bond returns put it as one of the world’s 10 best-performing bond, attributing the performance to investors’ positive perception of the major reforms in Africa’s biggest economy. Average performance for emerging market and frontier peers was 5.8 percent, according to a Bloomberg index.

The report attributed Nigeria’s securities’ performance to “a slew of economic changes” by President Bola Tinubu, who plans to simplify the country’s tax laws and improve electricity supply this year, after removing costly fuel subsidies and multiple foreign exchange (forex) rates in the previous year.

Emerging Markets Strategist, Societe Generale SA, London, Gergely Urmossy said investors were optimistic about the outlook for the Nigerian economic reforms.