Foreign portfolio investors will not automatically exit Nigeria because the Standing Deposit Facility now pays 20%, market analysts say. They do not place capital at that window.
The argument comes from an Africa Business Convention (ABC) briefing on foreign portfolio flows after the September policy meeting. It separates the deposit floor from tradeable money-market yields.
“The SDF reduction does not automatically trigger FPI flight,” the briefing tittled “Evaluating the CBN’s September 2026 Monetary Easing, Corridor Compression, and FPI Dynamics” said. “FPI allocation decisions target market-clearing yields and FX-adjusted carry spreads, not the central bank deposit floor.”
A day later, the Debt Management Office sold 364-day Treasury bills at a 15.89% stop rate. Bids topped N4.09 trillion against N400 billion offered, showing demand held.
That discount rate still translates to a true yield near 18.9%. After August inflation of 15.39%, the real cushion is thinner than last month but remains positive.
Offshore funds judge naira debt on an unhedged dollar basis. Local yield minus expected depreciation and a risk premium determines whether the carry stays attractive.
Nigeria’s external position is the main shock absorber. Gross reserves stood at $55.25 billion on September 18, equal to about 11.3 months of import cover.
The current account posted a $7.54 billion surplus in the second quarter, up from $4.49 billion in the first. Oil output and non-oil exports both improved.
The naira has been broadly stable around N1,330 per dollar at the official window since the meeting. That calm, not the deposit rate, is what keeps carry intact.
The briefing warns the real break point is currency expectations. If implied naira depreciation climbs toward 18 to 20%, dollar returns compress quickly.
Its base case for the fourth quarter keeps inflation drifting toward 14.5% and depreciation below 8%. That would still leave a double-digit net dollar carry.
A medium-risk path would see energy prices or Middle East tension shrink the trade surplus. Expected depreciation of 12 to 15% would narrow the buffer to low single digits.
The authors say the central bank must keep Treasury bill and OMO auction rates market-clearing. Pegging issuance yields to the deposit floor would erase the offshore incentive.
They also want regular, transparent reserve reporting so investors can price repatriation risk. Convertibility fears, not a two-point floor cut, historically trigger sudden stops.
For local investors, real returns on bills have tightened to about 4.6% after inflation over the past year. That squeeze is meant to push savings toward equity and real activity.
