The Central Bank of Nigeria's decision to implement aggressive interest rate increases throughout 2024 significantly boosted investor appetite for fixed income instruments, according to the President of the Association of Issuing Houses of Nigeria, Kemi Awodein.
Monetary Policy Drives Market Shift
Speaking during the AIHN's yearly general meeting and presentation of the 2024 financial statements in Lagos, Awodein revealed that the apex bank relied heavily on interest rate hikes as its primary tool to combat inflation. The AIHN's financial statements showed substantial growth, with total funds and liabilities increasing from N452.6 million in 2023 to N518.2 million in 2024.
The organization's financial performance strengthened significantly, with total income growing from N86.56 million in 2023 to N123.6 million in 2024. Expenditure rose from N50.08 million to N60.75 million during the same period, resulting in surpluses of N36.4 million and N62.9 million for 2023 and 2024 respectively.
Aggressive Rate Hikes Reshape Investment Landscape
Awodein detailed that key drivers for fixed income instruments in 2024 included CBN's aggressive interest rate hikes aimed at curbing inflation. The central bank implemented significant increases in February and March 2024 totaling 600 basis points.
Throughout the year, CBN hiked the benchmark interest rate eight times by a total of 875 basis points, raising it from 18.75 percent at the beginning of the year to 27.5 percent by November. This high-interest environment created a crowding-out effect on the private sector, substantially affecting issuance activities.
Government borrowing increased dramatically as liquidity management efforts intensified. Market data indicated that approximately N12.83 trillion in Open Market Operation bills and Treasury bills were sold in 2024, compared to just N716.7 billion for the entire previous year.
Renewed Confidence and Banking Sector Activity
Despite initial challenges, investor confidence strengthened as the year progressed, leading to increased capital inflows. This resurgence was driven by government policies and expectations of interest rate cuts in other global markets.
A landmark achievement was the successful issuance of the first domestic dollar bond by the Debt Management Office. The Nigerian investment banking sector also witnessed significant equity capital raise activity, spurred by the CBN's recapitalization announcement in March 2024.
By year-end, several banking institutions had completed transactions, with Access Bank Plc announcing it had achieved the new regulatory capital requirements. Other banks including Fidelity Bank, GTBank, FCMB and Zenith Bank had undertaken issuances targeting the new capital standards, with all banks required to complete their transactions before the end of Q1 2026.
The transition of Aradel Holdings Plc from NASD to the Nigerian Exchange provided substantial benefits for investors and shareholders, creating new investment opportunities while enhancing market liquidity.
Long-term debt capital raises remained subdued throughout 2024 due to the high-interest rate environment and frequent Federal Government issuances. Private sector activity was essentially crowded out, with debt capital raising concentrated in commercial paper issuances.
Prominent capital raising transactions included Seplat Energy's $650 million bond issuance for expanding energy operations and Airtel Africa's $500 million capital raise to enhance telecommunications infrastructure across the continent.
