By Jeph Ajobaju, Chief Copy Editor
Foreign investors are not bothered about the outcome of Nigeria’s presidential ballot on February 16, many anticipate good yields on their portfolio regardless of who wins the vote.
Presidential Muhammadu Buhari of the All Progressives Congress (APC) is campaigning on his record on security and battle against graft.
That claim is dismissed by Atiku Abubakar of the People’s Democratic Party (PDP), who pitches to diversify the economy and grant amnesty to treasury thieves who return their loot, as a way of fighting corruption.
“If the incumbent wins, status quo could remain and if the main opposition wins … they sound more pro-market so investors have nothing to lose,” one stock market trader in Lagos told Reuters.
Traders say foreign investors are buying Nigerian bonds partly to offset lower yields abroad, especially after the United States Federal Reserves signalled a dovish stance on rates this year.
Investors also assume limited policy changes in Nigeria if Buhari wins re-election, traders explain.
Atiku promises to privatise the Nigerian National Petroleum Corporation (NNPC) and float the naira to attract investors back to the country.
The naira has gained 0.55 per cent in a week to reach 361 against the U.S. dollar as foreign funds shrug off the risk of the election to buy government treasuries.
The naira is also expected to be stable next week with foreign investors buying it to participate in a treasury auction, boosting dollar liquidity, traders said.
Reuters reports that this week the naira traded at 361 per dollar on the over-the-counter market, strengthening from 363 last week.
At bureau de change (BDCs) it is quoted at 361 and 306.20 on the official market, supported by the Central Bank of Nigeria (CBN).
Foreign investors are buying one-year Nigerian treasuries, yielding 15 per cent, helping boost dollar liquidity on the currency market, after the naira touched 365 last month.
On February 7, the CBN auctioned N321 billion bills, more than it had offered. It has been selling treasuries to lure foreign investors that fled at the start of the cycle of interest rate hikes in U.S. which hurt the naira.
“There’s liquidity on the market,” one trader said.
“We have traded as low as 360.80 naira this week. Foreign investors are coming in. I don’t think they are as concerned with the elections or the premium on yield is good enough.”
On the stock market, Nigeria’s top 10 banks soared 3.74 per cent on February 7.
Nigeria has at least three different exchange rates the CBN uses to manage pressure on the naira.