Nigeria Gets US$270m Portfolio Investment Inflow

Godwin Emefiele, CBN Governor
Godwin Emefiele, CBN Governor
Two months after floating the naira, the Nigerian inter-bank foreign exchange market attracted a significant inflow from foreign investors of US$270 million today, Monday 29 August, the highest inflow from any foreign investor since the Central Bank of Nigeria (CBN) decided to float the naira.
The US$270 million inflow traded at N345 to the US$. This represents a naira equivalent inflow of N93 billion. It is not clear who brought in the significant inflow, the highest single dollar inflow into the market since the beginning of the year. The inflow is expected to significantly boost dollar liquidity in the interbank market and help reduce the pressure on the Nigerian naira.
The inflow raised the value of dollars traded in Monday’s trade to US$327 million, well above the average of US$50 million traded in the interbank market. CBN boosted dollar liquidity by selling additional dollar in the market at 314.50 to 317.34 per dollar. The dollar eventual closed at N305 per dollar on Monday.
Financial analysts believe the inflow may mark the gradual return of portfolio investors to the Nigerian market which has run out of liquidity after many of left due to unfavourable policies by the CBN. The inflow is expected to encourage other foreign portfolio investors to start looking the way of Nigeria again.
In a bid to attract portfolio investors to return to the Nigerian market, the CBN has raised interest rates to make Nigerian treasury bills and bonds more attractive. The CBN has recently sold treasury bills at yields as high as 18%, well above what foreign investors can get in developed countries. The high yields have made Nigerian bonds and treasuries attractive again.
Already, the CBN has announced plans to sell N212 billion worth of treasury bills with maturities ranging from 91 days to 365 days on Wednesday 31 August. The bills are expected to be oversubscribed due to their expected attractive yields.