Nigeria’s Low Yields Bad for Growth, Buhari’s Adviser Says

By Sahabi Abdul

Prevailing negative yields for Nigerian bonds, treasury bills and savings deposits represent a threat to economic growth, head of the president’s economic team said.

All the rates currently available for investments in bonds, treasury bills  savings and fixed deposits in Nigeria are currently below the annual inflation rate that was at 15.75 percent in December.  The consequence is that investors are losing money in real terms.

” I will expect that monetary policy will try and address the issues around the gap between inflation and interest rate,” Doyin Salami, chairman of the Presidential Economic Advisory Council, said on a webinar on Tuesday. Nigeria, to exit its current recession, needs all the investments it can attract, whether short- or long-term, he said.

Interest rates on Nigerian fixed-income securities and deposits have plunged since December 2019 as the central bank barred non-financial institutions and individuals from purchases of lucrative open market bills. This coincided with a surge in liquidity in the financial system as foreign portfolio investors were unable to take out their funds.

FBNQuest investment bank estimates that as much as $3 billion of foreign investors’ funds are currently trapped in Nigeria due to a shortage of foreign currency for repatriation of investments.

Salami is of the view that this bottleneck needs to be resolved and yields need to improve to encourage the inflow of investors funds to boost Nigeria’s economic recovery.