In Nigeria, real interest rates on government securities redeemable within one year plunged to -8.3% at the end of April 2020. At the time when this category of government treasury bills, which is the benchmark in the country, was yielding just over 4%, the inflation rate was 12.3%. In financial logic, the real gain of investments in debt securities is measured mainly in comparison with the level of inflation.

Indeed, one of the reasons economic players invest or save is because they wish to maintain the same purchasing power over time. If over a certain period, the generalized rise in prices reaches a higher rate than the return on savings or investment, the net realized return becomes negative.

In the case of Nigeria, investors are left with very few options. They are caught between a monetary policy that has to adapt to the crisis by lowering rates, and economic governance that has decided to raise taxes on consumption, which has contributed to accelerating the rise in prices. Nigerian analysts hope that as the government is forced to tap into its local debt market, interest rates may start to rise again, narrowing the gap with inflation.

The challenge for Nigerian investors could become an opportunity for those particularly in the WAEMU zone which is economically close to Nigeria. The inflation level in the WAEMU is forecast at 1.6% for the next eight quarters. If the yields of Nigeria's benchmark bonds are lower compared to those of WAEMU countries, the Nigerian debt market is more important and allows them to earn more in a business volume perspective.

Idriss Linge