Nigeria’s $500m domestic bond should be successful – Rewane

The domestic dollar bond launched on Monday by the Nigerian government should be successful, economic expert and CEO of Lagos-based Financial Derivatives Company Limited has said.

The $500m bond issue “will help provide technical support for the naira at the current trading levels,” he said in his presentation at this month’s edition of the Lagos Business School Breakfast Meeting.

“The good news is that the FGN is learning to respond quickly to negative economic developments and make changes where necessary. The problem is that the credibility costs of poor decision-making can increase the already wide trust deficit,” he said.

The money market rate is expected to rise further as the Central Bank of Nigeria (CBN) continues to tighten interest rates in a bid to rein in inflation, according to Rewane.

“Bond yields are anticipated to remain high as the CBN continues its hawkish stance,” he said. “The external reserve is anticipated to rise due to increase in portfolio inflows triggered by higher interest rates.”

He said the interest rate would have an adverse effect on the stock market performance and investors may shift their portfolios towards fixed-income securities.

The CBN has raised the policy rate by a cumulative 800 basis points, to a record 26.75 percent.

“The CBN is attempting to switch to an inflation-targeting system. But fiscal dominance and a growth-focused economic policy will be impediments. Inflation remains well above the 6-9% target range at 34.19% We expect a policy rate of 12% in 2028,” Rewane said.