CBN addresses impact of rising U.S yields on Nigerian economy

Governor of the Central Bank of Nigeria (CBN) Godwin Emefiele has said the plan of the United States to raise yields rate won’t affect the Nigerian economy, as America moves to attract investors to its bonds.

Emefiele made this known after the CBN’s Monetary Policy Committee (MPC) meeting, which held on Tuesday, January 25, 2022.

Ripples Nigeria had reported that the US had revealed it wanted to reduce its bonds holding after cutting interest rate during COVID-19 outbreak in 2020, which compelled investors to seek assets that will serve as save haven for their capital.

These led to high patronage of the capital market and cryptocurrencies, with investors hedging against inflation, induced by the lockdown, trade restrictions and other COVID-19 measures.

READ ALSO: IMF advises CBN: Devalue Naira further, increase interest rate

But with the US Federal Reserve expected to deplete its balance sheet by selling off bonds with high interest rates going into second quarter, investment in major capital markets are expected to be withdrawn in favour of US bonds – already, Nasdaq and the cryptocurrency are already suffering from this.

While responding to possibility of investors withdrawing financial stimulus – issued by developed countries to their citizens – which was thought served as a boost to Nigeria’s foreign liquidity during COVID-19, Emefiele said Nigeria wasn’t a beneficiary even though other emerging markets recorded the inflow.

Hence, there won’t be an affect on the Nigerian economy when they begin to withdraw their stimulus from emerging markets to invest in American bonds.

“When those flow were moving into emerging market, at a time the advance countries were offering stimulus into the economy, those flows did not come into Nigeria.” Emefiele told newsmen.

Speaking further on other foreign investment outflow aiming for the US yields, the CBN chief said there have been gradual exit due to some factors.

“And indeed, what we’ve been doing is to see to a gradual, systematic and orderly exit of foreign portfolio investors out of the country, because they (investors) feel the yields are not as high as they expect, and think there should be some instruments (assets) that will protect them.”

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