Nigeria Eurobonds Yield Climbs as Inflation Shifts Sentiment
Nigeria’s Eurobond prices declined in the international market as foreign portfolio investors and other holders offloaded the sovereign paper across the mid- and long-end of the curve.
The Riskoff sentiment lifted yields on the authority’s dollar bonds, reflecting higher borrowing costs amid accelerating headline inflation.
Traders said offshore investors reacted negatively to the recent surge in the consumer price index, despite the view that Nigeria is less exposed to the negative effects of the Middle East conflicts.
While Nigeria is an apparent winner, the people are suffering from higher petroleum prices following the redistribution of wealth in favour of the government after the subsidy removal, leaving them with no palliative.
The market reacted negatively to Nigeria’s 16% inflation, which makes the 27% interest rate benchmark appear ineffective. The Nigerian sovereign Eurobond market recorded losses across the yield curve amid soft demand for dollar-denominated instruments.
The bearish sentiment pushed average yields up by 23 basis points to 6.94%, indicating weakened investor confidence and reduced appetite for sovereign Eurobonds.
The market report showed that yields are expanding across the curve. This suggests increased profit-taking by global investors following the strong rally recorded in recent weeks.
Nevertheless, market fundamentals remain supportive, underpinned by elevated global crude oil prices and their positive implications for fiscal revenue generation.
In the foreign exchange market, the Naira depreciated by 70bps week on week to close at ₦1,371.4/US$ at the official window. Meanwhile, external reserves increased by US$218.0 million to US$48.5 billion, likely supported by inflows from crude oil export proceeds. Rand Loses Momentum as Unemployment Rises, Dollar Rally
