Foreign
investors continue to buy Nigerian assets, undeterred by rising violence and
security concerns. Omar Hafeez, CEO Citi Bank Nigeria cites $1.1 billion worth
of Eurobonds it had traded for three local lenders so far this year as
evidence.
However,
Reuters reports that any spread of attacks further south or to the commercial
hub of Lagos could begin to put off even established investors.
A
violent insurgency in Nigeria has killed hundreds this year, with the abduction
of more than 200 schoolgirls by Boko Haram making world headlines in April and
overshadowing the country’s rise to overtake South Africa as the continent’s
top economy.
Africa’s
top oil producer also faces
polls in 2015 that are likely to be the most
closely fought since the end of military rule in 1999, with many fearing
political violence and rampant spending on patronage, as usually happens in
election cycles.
“The
investment community is very well informed … Nigeria is a loan market and
financial investors have been tapping into treasury bills and bonds for a very
long time,” Hafeez said.
“The
way the market looks at Boko Haram … it’s still relatively restricted in terms
of geographic presence … but an increase (of attacks) to anywhere in the major
centres will have consequences,” he said.
Nigeria
is growing as an investment destination, attracting capital equity and debt
investors, but security and political risks cloud its outlook.
Hafeez
said Nigeria was witnessing an increase in both foreign direct investments and
portfolio flows.
Hafeez
said Citi was the largest arranger of Eurobonds in Nigeria and had sold $500
million for Zenith Bank, $400 million for Access Bank and $200 million for
Diamond Bank in the first half of the year.
FCMB
last week mandated Citi and Standard Chartered Bank to raise Eurobonds. Hafeez
said he expected more to follow.
“The
demand for long-term dollars is increasing in Nigeria as industries such as oil
and gas and power develop,” he said, adding that the demand could not be met
locally.
He
said banks were tapping Eurobonds to bolster their capital bases and also to
finance big-ticket deals in the oil and gas and newly privatised power sectors.
Elections
next year could become a worry if they affect the naira exchange rate to the
dollar and interest rates.
“I
think we could expect a certain amount of volatility pre-election but have I
seen people sitting on the fence? Not really,” he said.
“Commercial
realities determine the strategies, so it’s really not elections per say, it’s
what elections will do to the FX, interest rate market.”
Incoming
central bank governor has said he will work to maintain a stable exchange rate
and will not lower interest rates before 2015.
He
said Nigeria was Citibank’s biggest operation across sub-Saharan Africa and
that it was expanding its footprint to bank more local firms, especially as
multinational oil firms divest from the oil industry to domestic companies.
BusinessDay
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