10 •
The Lion King
• July - September 2016
EXPLAINING NIGERIA’S
MISSING DOLLAR INFLOWS
DESPITE NAIRA FLOAT
W
hen the Central Bank of
Nigeria (CBN) re-opened the
Nigerian Foreign Exchange
(FX) market in June, 2016 and
announced a new FX regime, market
watchers received the change with
open arms and much relief. However,
more than 4 months down the line,
foreign investor flows have not come
in as anticipated.
Admittedly, some good volumes have
trickled in but certainly not enough
to set the inter-bank market awash
with liquidity to the extent that the
naira would appreciate meaningfully.
It is common knowledge that given
the current circumstances of lower to
negative yields across global markets
(US 10-year Bonds: 1.56%, German
10-year Bonds: -0.008%, China 10-year
Bonds: 2.65%), and conversely, higher
yields in the Nigerian market (FGN
10-year indicative: 15.5%, 279-day
Treasury Bills: 18.50%), a rational inves-
tor who is aware of the “carry trade”
principle should find the Nigerian mar-
ket attractive in order to maximize
returns on his capital.
Carry trade is a popular trading strat-
egy that involves borrowing money
BY OLAWALE HAMED
BUSINESS
| EXPLAINING NIGERIA’S MISSING DOLLAR INFLOWS
