Nigeria to auction N117.2bn in short-dated Treasury bills

Nigeria is set to auction 117.2 billion naira worth of short-dated treasury bills this Wednesday, highlighting the country's ongoing focus on the fixed income and foreign exchange markets. Tosin Osunkoya, Co-Managing Partner and Head of Investments at Comercio Partners, recently shared insights on the state of the economy in an interview with CNBC Africa. The discussion revolved around the need for diversification away from oil as a primary source of foreign exchange (FX) revenue, and the challenges faced in the currency market. Osunkoya discussed the urgency for Nigeria to move away from its heavy reliance on oil revenues and focus on diversifying its revenue base. While acknowledging that this transition may take time, he expressed optimism at the government's commitment to the diversification agenda. He suggested that within the next five years, the country could see tangible results from this strategic shift. The recent Monetary Policy Committee (MPC) meeting had significant implications for the fixed income and FX markets. Osunkoya noted that following the MPC decision, there was a suspension of auctions in the market, leading to a 25 to 30-point decline in yields. He predicted a continuation of this trend as government allocations inject liquidity into the market, although he expected overall yields to remain relatively flat. In the bonds market, there was initial volatility due to anticipation of monetary policy changes, which resulted in a temporary increase in yields. However, Osunkoya anticipated a stabilization in the market, with trading expected to range between 15.9 and 16.3 points. The conversation shifted to the challenges in the currency market, with Osunkoya highlighting missed opportunities for policy adjustments. He referenced the Egyptian experience, where a devaluation of the currency led to increased foreign direct investment, despite initial shocks to the market. Osunkoya emphasized the need for decisive action in Nigeria to address the FX crisis and shore up confidence in the economy. He cautioned against prolonged delays in implementing necessary reforms, as they could further erode market confidence and exacerbate economic challenges. Osunkoya's insights underscored the critical importance of confidence in the market, both from foreign investors and local stakeholders. He emphasized the need for clarity and decisive action to restore trust in the local currency and stabilize the FX market. As Nigeria grapples with economic uncertainties and FX challenges, Osunkoya's assessment serves as a call to action for policymakers and market participants to address structural issues and drive sustainable growth.