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Uncertainty continues stifling local markets

07 March 2014, 10:28Okoro Chinedu

Lagos – Concerns over the legality of President Goodluck Jonathan’s move to suspend Central Bank of Nigeria (CBN) Governor, Lamido Sanusi, has been cited as one of factors that are causing uncertainty in the local stock markets.

Amid the air of uncertainty foreign interest in naira-denominated assets continue to wane as evidenced by limited offshore participation in the CBN’s T-bill auctions on Thursday.

“We had stated that an exodus of foreign investors from the fixed income market is still probable following Governor Sanusi’s suspension, as doubts over the lawfulness of the President’s decision and the autonomy of the central bank aggravate market uncertainty,” Rand Merchant Bank (RMB), one of the continent’s leading economic think tank, said in its latest update on the Nigerian markets.

RMB added that further debt redemptions, totaling roughly N320 billion (US$1.9bn), could precipitate a sell-off in the local T-bill market this month as offshore investors elect to close out their respective positions rather than incur potential losses by reinvesting in longer tenors.

Analysts said a lack of participation could also be attributed to the increased likelihood of an interest hike at the next Monetary Policy Committee meeting in mid-March which would lead to a steepening in short-term rates.

“While foreign investors might be disillusioned with naira-denominated debt instruments, the tick up in longer-dated bond yields presents an opportunity for local pension funds to lap up cheap benchmark bonds,” an analyst said.

– CAJ News

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