Foreigners stayed away from Nigeria’s latest Treasury bill auction, the first since the suspension of the central bank governor, Sanusi Lamido Sanusi, in a sign that investor confidence is yet to recover after the removal.

Nigeria had on Wednesday offered N180 billion ($1.10 billion) in Treasury bills on Wednesday, with a similar amount maturing this week. It sold N275.09 billion with yields on the 182-and 364-day papers rising further above 13 per cent, the central bank said.

Traders said foreign buyers remained on the sidelines and demand was dominated by less risk-averse local investors drawn by the attractive yields. Foreign participation was “very marginal,” said one analyst.

“It’s probably that as those bills mature some international investors won’t roll over the position in the new auctions, so they’ll just take their FX and leave,” he said, asking not to be named.

Further debt redemptions of at least 320 billion naira are expected in Nigeria this month, providing a barometer of foreign investor sentiment since February 20, when President Goodluck Jonathan suspended central bank chief Lamido Sanusi, citing “acts of financial recklessness.”

Offshore investors had been pulling back from Nigeria before Sanusi’s suspension amid a broader retreat from emerging markets.

Sanusi had been due to step down in June. Jonathan has nominated Godwin Emefiele, the managing director of Zenith Bank, Nigeria’s third-biggest bank, as his successor.

With more debt due to mature in the weeks ahead and limited liquidity in the secondary market, more outflows are likely this month as investors await the return of their money, said Ayo Salami, chief investment officer of asset manager Duet Group’s Africa Opportunities Fund.

“You don’t have sufficient liquidity to be able to exit by selling in the secondary market,” he said. “The worst of the outflows has not happened.”

Another concern is that interest rates could rise if the central bank feels that current policy efforts are failing to stabilise the naira, which has weakened this year amid emerging market volatility and after Sanusi’s removal.

“Given this scenario any investor (foreign or local) looking to exit via the secondary market would likely make a loss. So, better to be out of the market completely rather than risk making a loss if forced to exit swiftly,” said Angus Downie, head of economic research at Ecobank.

Investors will need more reassurance about the naira’s stability and the pre-election policymaking environment before being lured back. [Vanguard]