News Column

Danger of Insecurity Spreading South Worries Investors

July 2, 2014

Despite Nigeria's worsening security situation, foreign investors say they are not deterred from buying the nation's assets, Omar Hafeez, Citigroup's country head, said on Wednesday, citing $1.1 billion worth of Eurobonds it had traded for three local banks so far this year.

Hafeez told Reuters in an interview that a spread of attacks further south or to the commercial hub of Lagos could start to put even established investors off.

He said: "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.

"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.

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Source: AllAfrica

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