For at least two decades, foreign and institutional investors with capital flowing into West African capital markets have followed one dominant playbook—buy high-yielding government securities, wait to capture the interest rate differential and exit before currency depreciation erodes the interest rate gain. That is known as the carry trade. It worked, and slowly, it stopped working.
West Africa has recently experienced sweeping macroeconomic reforms, including Nigeria’s central bank unifying the exchange rate, Ghana’s fiscal consolidation led by the IMF, and the monetary tightening across Francophone West Africa. Analysts and economists alike believe that these were necessary corrections, but they have also fundamentally changed the terms of engagement for fixed-income arbitrageurs, especially since 2022. Real yields were once attractive but are now being compressed by the twin pressures of sticky inflation and structurally weaker currencies. The “hot money” cycle that characterised the 2010s, with foreign capital rushing into Nigeria and Ghana
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