Nigerian bonds rallied and the naira currency firmed on Friday after central Bank governor, Godwin Emefiele was nominated for a second term at the helm of the bank, traders said.
President Muhammadu Buhari has nominated Emefiele for another term, according to a letter read on the floor of the Senate on Thursday. The upper house is expected to confirm the nomination.
“Emefiele’s re-appointment has provided support for a rally that started on the bond market this week. Offshore buyers have welcomed the re-appointment,” one trader at the Nigerian unit of an international bank said.
Bond yields, which move inversely to prices, fell across maturities and extended losses on Friday following Emefiele’s nomination. Local asset managers and insurance companies accounted for much of the bond buying, traders said, with foreigners in the mix.
Analysts have said that Emefiele’s return could be supportive for bonds as investors hunt for yields on the debt market while equity players worry about slow growth, expecting sentiment to remain weak for stocks.
The benchmark 2028 bond yield fell to 14.20 per cent on Friday, down from 14.36 per cent the previous day while the naira, which has been trading tightly firmed to 360 per dollar after the nomination, traders said.
Meanwhile, local investors were caught completely off guard after President Buhari reappointed the CBN governor , Godwin Emefiele for a second term.
Although the market reaction has been somewhat mixed with the All-Share Index (ASI) edging -0.26 percent lower on Friday.
Reacting to the development, an international analyst with FXTM, Lukman Otunuga, said it is too early to come to any conclusions about how this will impact domestic markets moving forward.
“With the re-appointment of the CBN governor signaling continuity and removing an element of uncertainty over policy direction, this could be a welcome development for local shares and the Naira. However, more time will be needed to carefully assess what this means for inflation, interest rates and economic growth in the medium to longer term”, he said.