Nigeria’s fixed income & forex market watch

Nigeria's fixed income and forex market have been closely watched by traders who expect inter-bank rates to remain stable, owing to the current liquidity balance. Tunde Adama, Head of Trading at CITI Nigeria, recently joined CNBC Africa to provide insight into the latest developments in the country's money market. Following the recent Debt Management Office (DMO) auction where $100 billion worth of bonds were sold across the 5, 7, and 10-year tenors, the market has shown a positive response. Despite the $160 billion demand, the DMO managed to sell about $97 billion, reflecting the strong liquidity in the system. Traders have been eager to invest their cash, leading to increased demand in treasury bills and short-end bonds. While some investors are focused on short-term gains, others have shown interest in the longer end of the curve, indicating a diverse investment strategy in the market. Amidst expectations of a possible mop-up by the Central Bank of Nigeria (CBN), traders have remained cautious but proactive in their investment decisions. The CBN's recent emphasis on encouraging banks to lend to the real sector has raised questions about the future monetary policy direction. With the aim of achieving single-digit inflation and reducing interest rates over the medium term, the market anticipates gradual changes rather than sudden shifts. Bonds are currently trading in the early to mid-14s, while T-Bills discounts hover around 12% for the mid to long term. The desire for lower interest rates poses a challenge for fiscal authorities and the CBN, as achieving the target range of 10-11% will require sustained efforts and strategic planning. Despite the uncertainty surrounding future policies, investors are cautiously optimistic about the market's stability. The CBN's pledge to maintain a managed float system for the Naira has instilled confidence in traders, leading to a stable market outlook. As the market awaits further clarity on the CBN's lending directives and inflation targets, investors are expected to make more strategic decisions to navigate the evolving landscape of Nigeria's money market.