Real Return Positive as Interest Rate Exceeds Inflation in Nigeria
The fixed income market has taken a break from negative interest yield as the investment space turned green with positive real returns on government securities. Bonds and Treasury bills traders, including foreign investors’ participation in the OMO market, have started seeing positive interest yield on their funds.
Real return on fixed interest securities has become 3.02% positive on the back of a lower inflation rate of 24.48% and a much higher benchmark interest rate of 27.50% ahead of the monetary policy meeting.
Some analysts have projected a slowdown in monetary policy tightening, which appears to be the right step to grow the ailing economy to a level that per capita income would rise in line with frontier, emerging market trend.
Nigeria is way back in macroeconomic numbers, and policy analysts are hoping to see wide adjustments going forward. With the new market dynamics, delay in interest rate cuts would keep demand for naira assets trending across debt market.
If the Central Bank of Nigeria keeps interest rate at 27.50% this week, while inflation rate has moderated to 24.48%, then real return on investment would stay positive.
Local and foreign investors’ exposure to inflation would have been eliminated, and banks will start to increase their positions in fixed interest securities assets amidst rising asset quality challenges.
The reduction in the consumer price index is expected to trigger spot rate repricing, starting from the bonds auction. Treasury bills spot rate pricing will provide a guide, according to analysts sampled by MarketForces Africa. #Real Return Positive as Interest Rate Exceeds Inflation in Nigeria BEDC Builds New 33kv Feeder Line to Improve Power Supply in Edo
