Nigeria to see capital inflows as Fed cuts rates

Emerging markets like Nigeria are set to benefit from the 50 basis-point rate cut by the US Fed today, after a four-year hiatus. Analysts have projected significant foreign capital inflows into Nigeria as foreign investors look for safety nets.

The US benchmark interest rate was cut by 50 basis points to 5.00 – 4.75   percen from 5.25-5.5 percent. The Fed’s prime rate – the becnhmark rate- has sat at a 20-year high for the last year, making it more expensive to borrow money.

The decision was fuelled by recent inflation readings leaning toward the Fed’s target. Last week, U.S. inflation slowed for the second consecutive month to  2.5 per cent, the lowest in three years.

Victor Matthews, portfolio manager and fixed income trader, Norrenberger, said that once the cuts start, foreign investors may seek high-yielding instruments away from the US to move towards emerging economies.

“Our fixed income assets such as OMO bills, our Sovereign Eurobonds and even Treasury bills will see higher subscriptions from foreign investors,” Matthew said.