Yields to Remain High for Money Market Investors in Nigeria

By Aduragbemi Omiyale

Money market investors in Nigeria have been assured that despite the current economic challenges, yields will remain high this year.

According to analysts at FBNQuest, this would be supported by the resolve of the Central Bank of Nigeria (CBN) to sustain tight monetary policy amid inflationary pressure and the foreign exchange (FX) liquidity crisis.

The National Bureau of Statistics (NBS) recently said inflation for last month increased by 29.90 per cent on the back of aggravated food prices.

A few weeks ago, the central bank raised the stop rates of treasury bills to 19 per cent in a bid to soak more funds from the system.

Tomorrow, its Monetary Policy Committee (MPC) is expected to announce a new Monetary Policy Rate (MPR), otherwise known as the benchmark interest rate, which is currently at 18.75 per cent.

The jerking up of T-bills rates by the CBN some days ago signalled a possible interest rate hike tomorrow, and according to analysts at Meristem Research, this could be by 100 basis points.

In its Economic Outlook Report, FBNQuest, the asset management subsidiary of FBN Holdings Plc, said market yields should remain robust through this year.

“Market yields are expected to remain high this year, despite the current economic challenges.

“This is due to factors such as the tight monetary policy that the CBN is expected to sustain, as well as a sizable supply of Federal Government of Nigeria paper, which will be driven by domestic borrowings of around N6.1 trillion,” the firm stated.

Also, the Head of Equity Research at FBNQuest, Mr Tunde Abidoye, submitted that, “Despite the myriad headwinds confronting the economy, such as low-single-digit GDP growth, high inflation rates, and downward pressure on the naira exchange rates, the government’s steadfast commitment to policy reforms holds the potential to yield favourable economic outcomes.”