Understanding Nigeria’s debt strategy

Nigeria's Debt Management Office recently announced a shift in its borrowing strategy, opting to raise an earlier approved external borrowing of 850 billion naira from domestic sources instead. The move has sparked discussions about the implications for Nigeria's capital markets and overall debt strategy. Dipo Ajayi, Head of Fixed Income and FX at Chapel Hill Denham, shared his insights on the matter in an interview with CNBC Africa. The impact of easing lockdown measures on the capital markets was discussed, with Ajayi highlighting that the market has been resilient despite the challenges posed by the pandemic. He emphasized that the shift towards raising funds domestically was a strategic decision influenced by global economic conditions and Nigeria's need to stabilize its financial position. Ajayi also touched upon the recently approved $3.4 billion IMF loan for Nigeria, stating that it will inject much-needed capital into the market and help alleviate volatility. Additionally, he expressed optimism about the Central Bank of Nigeria's potential intervention in the market, expecting increased liquidity and investor confidence. Ajayi noted a growing interest in T-bills and bonds in the fixed income and FX markets, with investors seeking higher yields in the medium to long term. The focus on diversifying investment instruments, including commercial papers and foreign bonds, presents new opportunities for investors in Nigeria. Overall, Ajayi's analysis provides valuable insights into Nigeria's evolving debt strategy and the potential impact on its financial markets.