Foreign investors have continued to shy away from the bond market, following fears that the Central Bank of Nigeria (CBN) may devalue the Naira currency which may depreciate the bonds.

Analysis of the bonds' trading in the past three months showed that Nigerian local-currency in government bonds returned 10.8 per cent in dollar terms– the most among 31 developing nations monitored by analysts.

According to report, foreign investors were turned off on September 9, a day after JPMorgan Chase & Co revealed its intent to delist Nigeria from emerging-market bond indexes, the bonds fell to 12.86 per cent from a seven-month high of 16.32 per cent.

The AUTHORITY learnt that domestic investors are buying but foreigners' confidence has eroded from the attractive bond due to the Central Bank's forex policy. Christian Diclementi, a money manager at Alliance Bernstein LP, which has $27billion invested in emerging markets, said his firm needs greater confidence to invest in Nigeria. "For us, investment in the domestic bond market is more of currency than a rates issue. We need greater confidence on the outlook for the currency before returning to the market," he said.

Commenting on the development, the head research at Sterling Capital Markets limited, Sewa Wusu said: "Equities aren't attractive at the moment. The third-quarter results were pretty bad. So, most investors are pitching their tents in the bond market, which is why yields have declined."

Some investors would stay away as long as forex restrictions prevail in the Nigeria economy, Lutz Roehmeyer, who oversees more than $1 billion in emerging-market debt, has also revealed. "What keeps us away is that the yield is too low to compensate for the potential devaluation risk, even 16 per cent is too low. "The naira may have to depreciate anywhere between 10 and 20 per cent, when you're offered a yield of 13.5 per cent. Nigerian yields were the highest among emerging markets, but has since fallen below those of Kenya, Brazil and Egypt.

President Muhammadu Buhari backed CBN Governor, Godwin Emefiele's foreign-exchange controls, which prompted JPMorgan's exit – an action analysts insist is hurting the economy.

http://www.authorityngr.com/2015/11/-Naira-devaluation--Foreign-investors-shun-bond-market/

Hmmmmm

I thought one skinny skeletal idiot from daura, once said naira will be equal to dollar. still waiting to see this come to pass.

crazysaint:
I thought one skinny skeletal idiot from daura, once said naira will be equal to dollar. still waiting to see this come to pass.

hahahah that will be captured in 2016 budget. That's why the budget size is almost doubled (N8trn