Are Nigeria’s reforms attracting Foreign Portfolio Investors?
With the Treasury Bills rate hitting 19 per cent, analysts believe the government of Nigeria is sending strong signal towards a hawkish monetary policy as it seeks to tackle rising inflation and food security. Is this cheery news for Foreign Portfolio Investors? Tilewa Adebajo, CEO, CFG Advisory joins CNBC Africa for this discussion.
Thu, 08 Feb 2024 12:09:53 GMT
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AI Generated Summary
- The Treasury Bills rate in Nigeria has reached 19% for the one-year T-Bills, signaling a hawkish monetary policy stance to tackle inflation and food security.
- Challenges persist on the fiscal front, with a large deficit and low oil production posing hurdles for sustainable economic growth.
- Businesses are grappling with rising food inflation, foreign exchange risks, and the need to explore local alternatives for raw materials to navigate the evolving business landscape.
The Treasury Bills rate in Nigeria has reached 19% for the one-year T-Bills and 23% for the longer-dated Bills, indicating a move towards a hawkish monetary policy to address inflation and food security concerns. This shift in policy has raised questions about its impact on Foreign Portfolio Investors (FPIs) and the local business environment. Tilewa Adebajo, CEO of CFG Advisory, shared his insights on the situation in a recent interview on CNBC Africa. Adebajo highlighted the oversubscription of one trillion in T-Bills as a strong signal of market interest, driven by the central bank's efforts to align rates with inflation levels. The focus is on creating a positive yield curve to attract investors. However, Adebajo noted that fiscal challenges, including a large deficit and low oil production, remain significant hurdles. On the monetary policy front, he suggested a potential hike in the NPR rate to 25% to combat inflation effectively. The current food inflation rate of 33.9% poses challenges for businesses, with rising costs impacting operations and pricing strategies. Adebajo emphasized the need for businesses to navigate foreign exchange risks and explore local alternatives for raw materials to mitigate challenges. The interview shed light on the complexities facing Nigeria's economy and the strategies required for sustainable growth amidst uncertainties.
