Bloomberg News

Nigeria Ends Restriction on Fixed-Income Flows, Sanusi Says

June 23, 2011

(Updates with comment from Sanusi in sixth and seventh paragraph.)

June 23 (Bloomberg) -- Nigeria will lift a requirement for foreign investors to hold local-currency investments in government securities for at least one year, Lamido Sanusi, governor of the Central Bank of Nigeria, said.

The restriction, which will be removed on July 1, had impeded capital inflows since the 2008 global economic crisis, Samir Gadio, a London-based emerging-market strategist at Standard Bank Group Ltd., said in an earlier e-mailed note to clients. Sanusi confirmed the decision in an e-mailed response to queries after Gadio said he had spoken at a Standard Bank event in London.

“We see this development as a positive breakthrough that should further integrate Nigeria into the global financial system and allow foreign investors to take advantage of attractive double-digit yields,” Gadio said. “Few international investors were ready to be locked into a naira- denominated position for such a time frame.”

Nigeria had a total of 4.87 trillion naira ($31 billion) of outstanding domestic debt stock as of March 2011, according to the Debt Management Office, based in the capital, Abuja.

Yields on 70 billion naira of four-year and three-year bonds rose this month at the latest debt auction held by the West African country, according to the DMO. The yield on the 4 percent debt due April 2015 rose to 12.75 percent compared with 12.23 percent at last month’s sale. The yield on the 10.5 percent bonds due March 2014 climbed to 11.69 percent from 11.04 percent a month earlier.

Naira Appreciation

The naira may appreciate in response to the lifting of the capital control, Sanusi said by e-mail.

“With controls removed and positive interest rates a 145 naira to the dollar midpoint is possible by year end,” he said. The interbank rate of the currency of Africa’s biggest oil producer was 156.7875 per dollar as of 4:42 p.m. in Lagos, according to data compiled by Bloomberg.

“This move is likely to trigger a short-term rally in the naira, though actual portfolio flows will only be forthcoming from July, when the restriction is eased,” Citigroup Inc. analysts, including Johannesburg-based Leon Myburgh, wrote in a e-mailed note. “This decision is another constructive policy decision.”

--Editors: Antony Sguazzin, Alan Crawford

To contact the reporter on this story: Chris Kay in London at ckay5@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net; Gavin Serkin at gserkin@bloomberg.net


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