Nigeria’s naira bonds and treasury bills, priced in the local currency, are turning out to be something investors from abroad want to stay away from as the country’s high inflation makes the yields on those assets unattractive for them.
At 22.4 per cent, price levels in Africa’s biggest economy increased to their highest levels in nearly two decades last month, outrunning the rates at which such securities are priced so much that returns on them will have been much eroded by the time they fall due.
That has made their real yields negative, and foreign investors want notes to be priced higher to make up for inflation’s adverse impact.
Bloomberg cited a London-based institutional investor on Thursday as saying only rates in the 15-20 per cent band could tempt it to plough money into naira-denominated securities. An analyst at another told the news outlet that treasury bills’ yields need to really reflect the monetary policy rate to encourage foreigners to invest in…