By Babajide Komolafe & Michael Eboh

The Debt Management Office, DMO, has said that the removal of the restrictions on the holding of Federal Government of Nigeria’s, FGN, bonds by foreign investors will prompt decline in yields on bonds and cost of borrowing in the country.

Meanwhile the naira appreciated for the second consecutive day in the interbank foreign exchange market gaining 165 on Monday.

Director General, DMO, Mr. Abraham Nwankwo said, “The measure has removed residual restrictions on entry and exit of non-resident investments in Nigerian securities. All things being equal, the new rule would moderate yield downwards,”

The Central Bank of Nigeria, CBN, had last week, through a circular signed by the Director, Trade and Exchange Department, Mr. Musa Batari and titled , ‘Re: Purchase of money market instruments and federal government bonds,’ announced the lifting of the requirement that foreign investors hold investment in government securities for at least a year before they can divest.

According to the circular, foreign investors are guaranteed unconditional repatriation of their investments on maturity from the domestic foreign exchange market. The naira appreciated against the dollar by another 165 kobo at the interbank market reflecting increased expectation of lower exchange rate.

The interbank foreign exchange rate dropped to N154.285 per dollar at the close of business on Monday from N155.95 on Friday.

It would be recalled that on Friday the naira appreciated by 110 kobo at the interbank market as operators reviewed exchange rate expectations in response to the decision of the Central Bank of Nigeria (CBN) to remove the restriction on foreign investment in government securities.

A senior foreign exchange dealer who spoke on anonymity said that the appreciation of the naira was due to expectation of increase inflow of foreign exchange in response to the removal of the restrictions, hence downward review in exchange rate quoted by banks.

Meanwhile, the CBN has imposed a $250,000 limit on the amount of autonomous foreign exchange that bureaux de change can buy from bank.