Overview

November saw key developments in the stabilisation of Nigeria’s financial markets. Data was released showing that foreign portfolio investment (FPI) had reached US$1.1 billion in September and US$1.2 billion in October, almost double their average monthly levels during the first nine months of the year. There was a strong suggestion that foreign investor confidence was improving. This was reinforced by the fact that, during November, the average yield of the Federal Republic of Nigeria’s (FGN) outstanding Eurobonds fell by an average of 100 basis points (one percentage point).

This followed an upbeat report (in October) from the World Bank (the Nigeria Development Update, NDU), that awarded Nigeria high ratings for foreign exchange policy, removal of fuel subsidy, and monetary policy. It was therefore not a surprise to see the Naira/US dollar exchange rate stabilise in November, while the yield in the secondary market for Naira-denominated Treasury bills (T-bill) rose from 24.00% to 27.06% for bills of one-year’s duration, making investment in Naira-denominated securities increasingly attractive.

At its final meeting of the year, the Monetary Policy Committee of the Central Bank of Nigeria raised its Monetary Policy Rate (MPR) by 25 basis points (bps) to 27.50%, bringing the total of MPR rises to 875bps for the year. Policy that is primarily designed to combat inflation running at 33.88% year-on-year is tight across the board. And international investors appear to be taking note.

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