Investors are more confident on the outlook for the Nigerian economy as gains from macroeconomic reforms embarked upon by the President Bola Tinubu’s administration gradually take firmer shapes.
Data tracked by Bloomberg showed that Nigeria’s sovereign risk spread has fallen to the lowest level since January 2020, erasing the premium accumulated during the pandemic and subsequent strain on its economy.
Bloomberg noted that the benchmark index for the Nigerian stock market – the All Share Index (ASI) of the Nigerian Exchange (NGX), has risen by 11 per cent since December 2, last year triple the rise of the MSCI gauge for developing world equities.
“Nigeria is finally getting a favourable nod from investors, pushing stocks higher and bond yields lower as painful reforms restore confidence,” Bloomberg reported.
According to the report, while United States (U.S.) President Donald Trump’s widening trade war has taken emerging markets on a wild ride, Nigeria has quietly held its own, attracting foreign capital reassured by currency reforms and other measures designed to revive the economy of Africa’s most-populous nation.
“Nigeria appears to be back in business as long-awaited economic reforms take shape,” Emre Akcakmak, portfolio manager at East Capital said.
The key measures attracting investors were identified as improved currency liquidity, leeway for investors to repatriate their profit and the stable naira.
The naira has held in a narrow range between N1, 470 and N1,550 per dollar since early December. That composure is having widening benefits.
“We feel the Central Bank of Nigeria will continue to stem any sharp appreciation of the naira to limit profit taking from the fast money community,” Akcakmak said.
“Besides, Nigeria’s local market is seen as less correlated with global risk conditions than more liquid EM peers,” Gadio added.
Yields on Nigeria’s $1.5 billion euro bond due in 2034 have declined to 9.69 per cent, the lowest since its early December launch and a domestic debt auction was three-times oversubscribed last week, with the Open Market Operation (OMO) bills allotted at 21.45 per cent as against previous 22.65 per cent.
“We are bullish on the Nigerian reform story. The naira has been stable recently, largely driven by the growing confidence of offshore investors through foreign portfolio investment inflows,” analysts at Citigroup Inc wrote in a client note.
As well as raising borrowing costs by 875 basis points since taking office in September 2023, CBN Governor Olayemi Cardoso has cleared a backlog of local orders to purchase dollars that had dogged the naira and used OMO auctions to mop up excess liquidity.
Bloomberg reported that the CBN is expected to hold interest rates steady at 27.5 per cent when it announces the decision of the Monetary Policy Committee (MPC)’s meeting on Thursday.
The naira had suffered prolonged volatility after Tinubu eased its peg against the dollar in 2023, alongside other reforms. The shock, which triggered a 70 per cent devaluation against the greenback, took most of last year to fade until CBN stepped up to improve liquidity and transparency eventually gained traction.
The Nigerian stock market had recorded a full-year return of 37.65 per cent in 2024, one of the three highest returns across the global markets. Average year-to-date return so far in 2025 opened yesterday at 4.98 per cent, equivalent to net capital gain of about N3.13 trillion.
