CBN’s interest rate hikes boosting fixed income investments –Issuing Houses

*Kemi Awodein, President of the Association of Issuing Houses of Nigeria, affirms the Central Bank of Nigeria’s decision to effect considerable hikes in the country’s interest rates has boosted investors’ demand for fixed income instruments since 2024

Isola Moses | ConsumerConnect

The Central Bank of Nigeria’s (CBN) decision to effect considerable hikes in interest rates has boosted investors’ demand for fixed income instruments since 2024.

Kemi Awodein, President of the Association of Issuing Houses of Nigeria (AIHN), affirmed this while speaking during the AIHN’s Annual General Meeting and presentation of 2024 financial statements in Lagos.

Awodein said the CBN had relied on the interest rate hikes to address inflation in the economy.

Likewise, the AIHN financial statements for 2024 showed that total funds and liability grew from N452.6 million in 2023 to N518.2 million in 2024.

Its total income grew from N86.56 million in 2023 to N123.6 million in 2024, while expenditure for 2023 stood at N50.08 million, the figure for 2024 was N60.75 million resulting to surplus of N36.4 million and N62.9 million for 2023 and 2024 respectively.

As regards markets development since last year, she reportedly noted: “Key drivers for fixed income instruments in 2024 included: – Central Bank of Nigeria’s (CBN) aggressive interest rate hikes to combat inflation.

“There were significant interest rate hikes in February and March 2024 (a total of 600 basis points), aimed at curbing inflation. In 2024, CBN hiked the benchmark interest rate eight times and by 875 basis points to 27.5 per cent in November from 18.75 per cent at the beginning of the year”.

Awodein also explained that the high-interest environment has witnessed the crowding out of the private sector, affecting issuance activities.

She disclosed that government borrowing increased significantly, just as efforts at managing liquidity were also heightened in the economy.

The President of the Association of Issuing Houses of Nigeria stated: “Data indicate that about N12.83 trillion in OMO bills and T-bills were sold compared to N716.7 billion for the whole of 2023.

“Despite these challenges, as the year progressed, there was renewed investor confidence, leading to increased capital inflows.

“This was driven by government policies and the anticipation of interest rate cuts in other markets.

“Significant in the year was the successful issuance of the first domestic dollar bond by the Debt Management Office (DMO)”.

According to her, in 2024, the Nigerian investment banking sector equally witnessed a significant activity in equities capital raises, spurred by the announcement on recapitalisation by CBN March last year.

Awodein also said: “By years-end, a number of banking institutions had concluded transactions, with Access Bank Plc announcing the attainment of the new regulatory capital.

“The activity in the sector will continue in earnest in 2025 as the deadline of March 2026 approaches.”

As regards highlights of market development, she said the transition of Aradel Holdings Plc from NASD to Nigeria Exchange (NGX) was impactful for investors and shareholders, providing investment opportunities as well as enhancing liquidity.

“Long-term debt capital raises were muted in 2024 in light of the interest rate regime and the significant and frequent issuances by the FGN. The private sector was essentially crowded out. Activities in debt capital raising was concentrated in Commercial Paper issuances”.

“Capital Raising – Prominent transactions included Seplat Energy’s $650 million bond issuance, aimed at expanding its energy operations, and Airtel Africa’s $500 million capital raise, which was used to enhance telecommunications infrastructure,” she stated.

Awodein added: “By the end of 2024, some banks, including Fidelity Bank, GT Bank, Access Bank, FCMB and Zenith Bank, had undertaken issuances targeted at meeting new capital requirements. Recapitalisation was completed at year’s end by Access Bank, with all Banks being required to complete their respective transactions before the end of Q1 2026.”

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