What will be the Federal Government of Nigeria’s (FGN) next move when it comes to financing its deficit? Movements in the foreign exchange and open market operation (OMO) markets last week prompted market comment that Nigeria is courting foreign portfolio investment (FPI) to participate in Naira instruments. This may be true, but today’s market conditions …

Last week the Monetary Policy Council of the Central Bank of Nigeria (CBN) concluded its two-day meeting by leaving its key policy rate unchanged at 11.50%. After two cuts during 2020 that demonstrated the CBN’s resolve to deal with recession, last week’s announcement was not a surprise. And, as expected, the official communique had plenty …

The Monetary Policy Council (MPC) of the Central Bank of Nigeria concludes its bi-monthly meeting later today.  The economy may be close to exiting recession and inflation is going up (15.75% y/y in December). But we think the MPC will keep its policy rate (MPR) at 11.50%, though with increased commentary on the need to …

When the World Bank recently published its Global Economics Prospects, we were surprised to see a 4.1% recession estimated for Nigeria in 2020.  In our view, the Nigerian economy is somewhat stronger than that. Even though the World Bank and the IMF have enviable track records in forecasting the Nigerian economy, we think that 2020’s …

The Central Bank of Nigeria (CBN) follows a managed exchange rate policy, but is it moving towards a crawling peg?  Last year saw several changes in the CBN’s official rate, and smaller (though significant) changes in Naira exchange rates quoted by FMDQ, Nigeria’s over-the-counter (OTC) exchange. Moves recorded in the last trading sessions of 2020 …

2020 was dominated by the Covid-19 pandemic, the crash in commodity prices and the global recession. Right? Not quite. Looking back over the past 12 months in Nigeria we reason that domestic factors have driven Nigeria’s financial markets: the intentional crashing of market interest rates, and the associated rally in the stock market. Nigeria was …

Nigerian market interest rates are on the rise. This marks the end of the long – over a year – march south. But what next? In our view, the key determinants are how the 2021 budget deficit will be financed and how normal (given that the present interest rate/inflation mix is not normal) the Central …

Last week the price of oil, Brent crude, edged up over US$50.00/bbl, the first time we had seen this level since March. This raises hopes of much stronger public finances in 2021 than we have seen in 2020 if the rally is sustained into 2021. However, a return to normal, in terms of policies, seems …

Last week saw the Central Bank of Nigeria (CBN) announce changes in the foreign exchange (FX) market and in its Cash Reserve Ratio (CRR) regime. The changes in the FX market are already increasing liquidity, which is good. The changes in the CRR, though they look purely like banking supervision, could allow the CBN to …

Interest rates have been falling all year and the government is running a deficit. So, is it safe to assume that the government is issuing a lot more Treasury Bills and bonds than before? Not quite. Issuance has risen, but not much, as we explain below. Meanwhile, customer deposits are increasing rapidly in the banking …