Lagos, May 7, 2025 – CFG Africa, a leading financial services firm formed by the merger of Maynard Partners and Concreed Capital, has announced the launch of its Naira Fixed Income Fund, a strategic response to Nigeria’s volatile economic landscape. The fund, registered with the Securities and Exchange Commission (SEC) of Nigeria, targets institutional and high-net-worth investors seeking stable returns in a market grappling with naira depreciation, inflation, and shifting monetary policies. This move underscores CFG Africa’s commitment to innovative investment solutions tailored to Africa’s dynamic financial environment.

Fund Overview

The Naira Fixed Income Fund is an open-ended unit trust scheme designed to deliver competitive risk-adjusted returns through investments in naira-denominated fixed-income securities, including:

• Federal Government of Nigeria (FGN) bonds
• Treasury bills
• Commercial papers
• Corporate bonds
• Money market instruments

The fund aims to provide liquidity, capital preservation, and steady income, with a minimum investment horizon of one year to optimize returns. CFG Africa leverages its multi-asset expertise to build a diversified portfolio, emphasizing downside risk protection while aligning with sustainable economic growth objectives, similar to the FCMB-TLG Private Debt Fund launched in May 2024.

Market Context and Rationale

Nigeria’s financial markets have faced significant challenges in 2024 and early 2025, creating both risks and opportunities for investors:

• Naira Volatility: The naira weakened to N1,625.13 against the US dollar in the Investor and Exporter (I&E) window on October 9, 2024, a 4.06% decline from the previous day, with parallel market rates nearing N1,621/$1. Standard Chartered’s economist Razia Khan noted that $1.3 billion in naira futures maturing in May 2025 could further pressure the currency, increasing demand for dollars.
• Inflation and Policy Shifts: The Central Bank of Nigeria’s (CBN) 2023 exchange rate liberalization led to a 36% naira devaluation, while fuel subsidy removal drove inflation, eroding business confidence and consumer purchasing power. The Stanbic IBTC PMI reported a six-month high in input costs in September 2024, with business conditions below 50 for three consecutive months.
• Fixed Income Opportunities: Despite volatility, Nigerian fixed-income markets have shown resilience. The benchmark yield on FGN bonds stabilized post-auction in early 2025, and mutual funds, particularly ethical funds, yielded 10.76% on average in Q1 2024, driven by 30.89% returns from ethical investments.

CFG Africa’s fund capitalizes on these dynamics, offering investors a hedge against naira depreciation and inflation through high-quality fixed-income assets. The firm’s experience with halal permissible investments and commercial papers, which offer rental yields of 10% for naira-denominated assets, informs its strategy.

Strategic Objectives

The Naira Fixed Income Fund aligns with CFG Africa’s mission to bridge gaps in Africa’s financial services sector by providing accessible, sustainable investment solutions. Key objectives include:

• Capital Preservation: Prioritizing low-risk securities like FGN bonds and treasury bills to safeguard investor capital amidst currency and inflation pressures.
• Income Generation: Targeting competitive yields, with historical data suggesting naira fixed-income funds can achieve 5–10% annual returns, as seen in similar funds like the Stanbic IBTC Dollar Fund’s USD equivalent.
• Diversification: Building a mixed portfolio to mitigate risks from macroeconomic instability and interest rate fluctuations, a strategy CFG Africa employs in its halal investment offerings.
• Investor Inclusivity: Catering to diverse investors, including those prioritizing ethical or faith-based principles, drawing on CFG Africa’s expertise in non-interest financial products.

The fund’s portfolio allocation will be guided by economic outlooks, asset class sustainability, and client-specific goals, as outlined in CFG Africa’s investment process, which begins with discovery meetings to tailor strategies.

Competitive Landscape

The launch follows the introduction of Nigeria’s first naira-denominated Private Debt Fund by FCMB-TLG in May 2024, which raised N10 billion under a N100 billion program, targeting sectors aligned with UN Sustainable Development Goals. CFG Africa’s fund differentiates itself by focusing exclusively on fixed-income securities, offering greater liquidity and lower risk compared to private debt. It also competes with mutual funds like the Stanbic IBTC Aggressive Fund, which blends equities and fixed income but requires a N20 million minimum investment, and dollar-denominated funds like the Legacy USD Bond Fund, which hedges against naira depreciation but carries currency risk for naira-based investors.

Challenges and Risks

The fund faces several risks:

• Currency Instability: Ongoing naira depreciation, with the currency hitting N1,470 on the black market in May 2024, could erode real returns unless offset by high yields.
• Interest Rate Risk: Rising CBN rates to curb inflation may depress bond prices, though short-term instruments like treasury bills mitigate this.
• Liquidity Constraints: Nigeria’s forex shortages, exacerbated by low oil output, could limit market depth, impacting fund operations.
• Regulatory Hurdles: While SEC approval ensures compliance, evolving regulations, as seen with the CBN’s naira redesign fallout, could introduce uncertainties.

CFG Africa’s track record in navigating Nigeria’s markets, including its commercial paper offerings and government securities trading, positions it to manage these risks effectively.

Skeptical Perspective

While CFG Africa’s fund taps into a growing demand for stable investments, skeptics might question its timing amid Nigeria’s economic turbulence. The naira’s persistent decline and inflation spikes could outpace fixed-income yields, reducing real returns. Critics may also argue that the fund’s reliance on government securities exposes it to sovereign risk, given Nigeria’s rising debt and fiscal challenges. Additionally, competing dollar-denominated funds may attract risk-averse investors seeking currency stability, potentially limiting the fund’s appeal. However, CFG Africa’s focus on diversification and ethical investing could counter these concerns, appealing to a broad investor base.

Outlook

The Naira Fixed Income Fund’s launch reflects CFG Africa’s strategic adaptation to Nigeria’s evolving market dynamics, offering a timely vehicle for investors navigating currency and inflation risks. By prioritizing liquidity and stability, the fund aims to capture demand for safe-haven assets in a high-yield environment. As Nigeria’s economy braces for further reforms, including potential CBN rate adjustments and IMF-backed stabilization measures, CFG Africa’s initiative could set a benchmark for innovative fixed-income solutions in Africa’s largest economy.

Sources: CFG Africa, Nairametrics, Reuters, AVCA, MarketForces Africa, posts on X