FGN Eurobond Yield Rises after Debt Restructure Gaffe

FGN Eurobond Yield Rises after Debt Restructure Gaffe

The average yield on Nigeria’s Eurobond spikes as the market reacted to the poser that Nigeria plans to restructure debts with multilateral lenders – International Monetary Funds and the World Bank.

Investors sold off Eurobond holdings as Nigeria’s finance minister Ahmed Zainab told Bloomberg that Africa’s largest economy by gross domestic products size of $450 billion plans to explore debt restructuring and borrow from the international debt capital market in 2023 if the market condition improves.

Local and foreign investors understand that restructuring a nation’s debt confirms that there are financing pressures driven by possible uncertainties in the macroeconomic performance.

Analysts told MarketForces Africa debt restructuring process typically involves getting lenders to agree to reduce the interest rates on loans, extend the dates when obligations are due to be paid, or both.

Weighing the gravity of the finance minister’s statement on the international stage, Debt Management Office (DMO) retracted the statement, saying such intention does not exist.

In its market note, Cowry Asset Management stated that the value of FGN Eurobonds traded in the international capital market depreciated for most maturities. READ:Nigeria’s Debt Office Denies Plan to Restructure Debt

The 10-year 6.375%, July 12, 2023 Eurobonds; the 20-year, 7.69% paper due on February 23, 2038, and the 30-year, 7.62% debt due on November 28, 2047, lost $1.23, $2.86, and $3.16, respectively.

Meanwhile, analysts reported that their corresponding yields rose to 10.26% as of Friday’s close from 8.41%, 14.17% from 13.51%, and 13.78% from 13.07%, respectively.

In the local market, DMO is expected to conduct a primary market auction for N225 billion re-opening bonds worth. The bundle is expected to split as N75 billion a piece for the 14.55% FGN APR 2029, 12.50% FGN APR 2032, and 16.25% FGN APR 2037 re-Openings.

Market analysts said they expect the stop rates to rise – mirroring the rise in the money market rate for 364-day bills.

# FGN Eurobond Yield Rises after Debt Restructure Gaffe#

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