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Investors Weigh Impact of US Rate Hike



  • Investors Weigh Impact of US Rate Hike

Investors are weighing the possible impact of the increase in the United States’ benchmark interest rate as against expected returns on their investments in Nigeria.

Prior to last week’s rate hike in the US, financial and economic experts had said the return of foreign portfolio investors to Nigeria was being threatened by the rising interest rates in the US.

The US Federal Reserve, on Wednesday, voted to raise the target for its benchmark interest rate by 0.25 per cent, citing solid economic expansion and job gains.

The widely-anticipated decision will lift the target for the central bank’s benchmark rate to a range of 1.75 per cent to two per cent, the highest level since 2008.

A majority of Fed officials also forecast two more rate rises this year, one more than previously predicted, according to the British Broadcasting Corporation.

The rise is part of the US recovery following the global financial crisis. It is the seventh time the bank has raised rates since 2015.

Analysts said the higher rates in the US had contributed to turmoil in some emerging markets, where low rates had prompted investors to pour in money in recent years in search of returns.

The Managing Director, Afrinvest Securities Limited, Mr Ayodeji Ebo, in a telephone interview with our correspondent, noted that the US rate hike was in line with expectations.

He said, “So, we don’t expect any knee-jerk reaction or sudden capital flow reversal. In the last one or two months, we have seen sell-offs across emerging markets; so, we don’t expect any major impact as a result of this hike because it had been anticipated. So, I don’t see it affecting the equities market.

“But as we go into the end of the year, the combination of elections and higher interest rates in the US would result into reduction of exposure of portfolio investors to Nigeria.”

The naira is seen flat at about 361 per dollar this week as investors weigh the impact of monetary tightening in United States against expected returns from holding local treasuries, Reuters quoted traders as saying.

Nigeria saw an exodus of foreign investors after the steep fall in the price of crude oil from mid-2014 triggered a currency crisis and the first recession in 25 years.

But the total value of capital imported into the country rose in the third quarter of last year, for the first time since the fourth quarter of 2015, following the emergence of the economy from recession in the second quarter of last year. The rise was driven by portfolio and other investments.

“Rising US interest rates and the consequent narrowing of the interest rate differentials with Nigeria, where yields on sovereign securities are falling, pose a threat to the resurgence of portfolio inflows into Nigeria,” an Associate Professor and member of the faculty at the Lagos Business School, Dr Doyin Salami, said last month.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq,, Investorplace, and many more. He has over two decades of experience in global financial markets.

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China’s State-Owned Lenders Allocate $8 Billion to Revitalize Property Market



General Images Of Residential Property

China’s state-owned lenders have committed a substantial $8 billion in loans to rejuvenate the country’s beleaguered property market, aligning with Beijing’s directives to bolster the sector.

Agricultural Bank of China Ltd. disclosed approving over 40 billion yuan of loans for real estate projects on predefined white lists, signaling a proactive approach towards supporting the housing market’s recovery.

China Construction Bank Corp. also joined the effort, extending 3 billion yuan to five property projects, with plans to greenlight over 20 billion yuan in loans soon.

Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. are among the institutions offering financing assistance, although the exact loan amounts remain undisclosed.

This initiative follows Beijing’s recent call for local authorities to enhance financing support for developers and curate lists of eligible projects.

In response, the big four state lenders pledged to meet reasonable financing demands from developers and projects identified under the coordination mechanism.

However, China’s property market faces challenges despite these measures. New home sales plummeted 34.2% year-on-year, underscoring the ongoing slowdown.

While existing home transactions surged during the Spring Festival holiday, new home sales remained subdued, prompting a cautious outlook among buyers.

The infusion of $8 billion aims to instill confidence and stimulate activity in the property sector, potentially heralding a gradual recovery amid persisting market uncertainties.

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BUA Foods Invests $200m in Lafiagi Sugar Estate Expansion



BUA Foods, a leading Nigerian food conglomerate, has announced an investment of $200 million in its Lafiagi Sugar Estate located in Kwara State.

The Managing Director of BUA Foods, Ayodele Abioye, revealed this during a press briefing held at the company’s headquarters in Lagos.

Abioye said the leading company plans to enhance its integrated sugar estate project to reduce reliance on foreign exchange for raw materials.

The project includes the construction of a sugar refinery, ethanol plant, and supporting infrastructure aimed at bolstering local production.

The Lafiagi Sugar Estate spans approximately 20,000 hectares and integrates various components such as a sugar refinery with a daily capacity of 20,000 metric tonnes, along with an industrial ethanol plant.

Abioye underscored the importance of reducing dependency on forex for sourcing raw materials, citing challenges faced due to Nigeria’s lack of industrial agricultural production of sugarcane.

BUA Foods aims to bolster its local supply chain by engaging with communities and establishing partnerships in agriculture.

Abioye emphasized the need for sustainable practices and community involvement in fostering self-sufficiency.

The company’s investment reflects its dedication to expanding domestic production capabilities and driving economic growth in Nigeria’s agricultural sector.

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Treasury Bills

Nigeria’s One-Year Treasury Bill Oversubscribed by 300%



FG Borrows

Nigeria’s one-year treasury bill was oversubscribed by 300% during the recent Primary Market Auction conducted by the Central Bank of Nigeria (CBN) on Wednesday.

The auction, aimed at rolling over maturing Nigerian Treasury Bills worth N1 trillion, saw unprecedented demand for the one-year T-bill.

Investors offered a total of N1.87 trillion for the N600 billion on offer, indicating a significant appetite for government securities. Out of the total subscriptions, N908.75 billion was allotted, with stop rates set at 19%.

The auction covered maturities across three different tenors: 91-day, 182-day, and 364-day bills, with varying amounts on offer.

While the 91-day bill received N39.90 billion in offers, all were sold, and the 182-day bill garnered N76.83 billion subscriptions, out of which N51.35 billion was allotted.

Managing Director of Arthur Steven Asset Management, Tunde Amolegbe, attributed the remarkable performance of the one-year bills to investor confidence in the current government and its reform initiatives.

He highlighted investors’ preference for higher rates due to signals from the CBN indicating tightening monetary policies amid accelerating inflation.

Experts view the oversubscription as a testament to investors’ trust in the government’s reforms and management of the country’s debt obligations.

The auction reflects a move by the CBN to address liquidity in the financial system while managing Nigeria’s debt obligations effectively.

The significant oversubscription signals robust investor confidence and highlights the attractiveness of Nigerian government securities despite prevailing economic challenges.

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