Non-Resident Holdings of Domestic Debt in Nigeria: Internal or External Driven?

22 Pages Posted: 10 Jun 2020

See all articles by Amr Hosny

Amr Hosny

International Monetary Fund (IMF)

Date Written: May 2020


Foreign holdings of domestic debt instruments in Nigeria have been increasing. Using data over 2007M1-2019M1, we show that, on average, global factors (global interest rates, oil prices) seem to carry more weight than domestic factors (treasury bills rate and domestic risk) in foreign portfolio invetsors' decisions in Nigeria. Specifically, we show that foreign participation is, in the long run, positively correlated with oil prices and profitable rates of return on local-currency instruments, but negatively correlated with exchange rate depreciation pressures. In the short run, oil prices, opportunity cost of funds and perception of Nigeria-specific risks also play a role. These results highlight the volatile short-term nature of such flows and call for a package of policy reforms to attract longer term direct investments.

Keywords: Financial crises, Access to international capital markets, Financial markets, Foreign investment income, Domestic debt, foreign holdings, local currency debt, portfolio flows, Nigeria, WP, foreign holding, NTB, VIX, foreign participation, domestic factor

JEL Classification: F30, G11, G15, O16, E01, G21, F16, E52, H63

Suggested Citation

Hosny, Amr, Non-Resident Holdings of Domestic Debt in Nigeria: Internal or External Driven? (May 2020). IMF Working Paper No. 20/63, Available at SSRN:

Amr Hosny (Contact Author)

International Monetary Fund (IMF) ( email )

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United States

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