Nigerian bonds thrive in the face of liquidity issues - CNBC Africa

Nigerian bonds thrive in the face of liquidity issues

Western Africa

by Dara Rhodes 0

Nigeria bond yields pick up. PHOTO: Getty images

“The irony in the sense is that, even though the central bank left the policy rate unchanged on 12 per cent at this week’s MPC, they’ve actually allowed an accumulation of excess liquidity in the system,” Samir Gadio, Emerging Market Strategist  at Standard Bank told CNBC Africa.

However, a flaw has been found at the end of the curve as investors are increasingly becoming cautious about the medium term outlook domestically.

“I don’t think there’s any significant appetite for that duration and I’m also worried that if yields go down aggressively, at some point there’s going to be a sudden reversal and they’ll be caught off guard,” he added.


While the market is currently at a stabilised level, Gadio believes that it will continue for some time around the 12.5, 12.6, 1.7 mark and that we are not going to go further down regardless of the fact that there’s a lot of liquidity in the system.

Meanwhile, in Ghana, interest rates have seen an increase by the Bank of Ghana as the Cedi has continued to experience significant pressure.

“The big event there was the 2014 budget which was presented this week, as we expected, the fiscal consolidation that is going to happen will be very gradual so the target for next year will be between six to seven per cent of GDP from about 10 .2 per cent this year,”

“I think the government have realised that the current financing cost is just not sustainable because if you continue to borrow at 20 plus per cent at some point your debt service is just going to become unsustainable,” he said.