FG BOOSTS NAIRA BONDS

The naira and some other African currencies such as the Kenyan shilling strengthened, even as yields on the continent’s dollar bonds fell, after the Federal Reserve refrained from reducing stimulus that had triggered a rally across emerging markets.

Federal Reserve policy makers, led by its Chairman, Ben Bernanke, said on Wednesday that they want more evidence of lasting improvement in the United States economy before paring the central bank’s $85 billion monthly bond-buying programme.

The median estimate in a Bloomberg survey of economists was for a $5 billion reduction. Ten out of 24 African currencies tracked by Bloomberg gained against the dollar, while six were unchanged and eight weakened.

However, data from the Financial Market Dealers Association (FMDA) showed that the naira appreciated against the US dollar significantly by N1.19 to close at N161.30 to a dollar yesterday, from the N162.49 to a dollar it closed on Wednesday.

“The Fed produced a huge surprise,” London-based strategists at Societe Generale, Benoit Anne, wrote in an e-mailed note.

“Emerging-market investors will move on and go on a buying spree.”

Zambia’s kwacha jumped 0.9 per cent to 5.245 per dollar, set for its best close since May, while Kenya’s shilling climbed 0.3 per cent to 87.20 per dollar, heading for its best close since July 19.
Kenya, East Africa’s largest economy, plans to raise at least $1.5 billion this year in its first sale of dollar bonds, following other sub-Saharan African nations including Zambia and Rwanda selling dollar-denominated debt, which will help plug a budget deficit and finance construction of ports, railways and power-generation projects.

The Fed holding off on paring bond purchases is also “good news” for Kenya’s expected Eurobond sale, the London-based Chief Global Economist at Renaissance Capital, Charles Robertson, wrote in an e-mailed note.

The rate on 10-year Nigerian dollar-denominated notes fell by 12 basis points to 6.13 per cent, the lowest since August 21.