Nigerian Eurobonds Yields Steady, SSA Economies Pay High on Borrowing
The Nigerian Eurobonds yields steadied at 8.02% as foreign investors remained cautious and opted to stay on the sidelines while reassessing their portfolio allocations following recent rate cuts by major central banks.
The market saw a mild bullish tone on Nigeria’s Eurobonds amid the ongoing U.S. government shutdown, prompting mild buy-interest and a modest rise in yields across several maturities.
Compared with other African issuers, offshore investors showed preference for Nigeria’s US dollar bonds, supported by high yields which priced in country’s dynamics.
Nigeria’s key market economic indicators are improving with sustained disinflation, and firmer local currency. The authority has also switched to expansionary policy, and remove dollar repatriation restriction.
These developments continue to boost investors’ sentiment versus other African bonds, though the country’s borrowing costs have not adjusted to reflect the economic successes.
“. Future efforts to deepen financial markets, boost confidence and tackle corruption may help gradually lower borrowing costs”, Moody’s said in credit condition report obtained by MarketForces Africa.
The market reported that the NIG 2025, 2030 2047 and 2051 US dollar papers had mild positive sentiment while most other papers saw slight upward repricing.
In the local market, the FGN bonds market traded with a mixed to mild bullish tone across tenors. The 2028s, 2032s, and 2053 were offered around 16.12%, 15.99%, and 15.47% respectively, though wide bid-ask spreads limited executed trades.
The benchmark yield curve fell slightly by 1bp to 16.05%. Market sentiment is expected to turn bullish as investors react to the lower 1-year Nigerian Treasury bills stop rate, with ample liquidity conditions providing additional support
Moody’s said in an update that Sub-Saharan African (SSA) economies have substantial funding needs for development. However, limited equity capital and high debt costs remain key barriers despite access to funding broadening over time.
The global rating agency stated that three of the largest markets – South Africa (Ba2 stable), Kenya (Caa1 positive) and Nigeria (B3 stable) – face a combination of structural weaknesses which keep borrowing costs high and will take time to address.
Nigeria’s top go to market for offshore investors due to relatively high yield on sovereign Eurobonds, reflecting the country’s political, economic and social risks.
“Despite advanced financial markets, South Africa has higher borrowing costs than emerging market peers,” Moody’s Ratings said in a regional update obtained by MarketForces Africa.
Still, South Africa’s borrowing costs are lower than those in frontier markets like Kenya and Nigeria, the rating agency added in its update.
“All sectors benefit from deep financial markets and effective monetary policies, but costs are still higher than in many major emerging markets because of economic and fiscal constraints.
“Without improvements, South Africa risks continuing a negative spiral in which high interest rates aimed at attracting inflows amid subdued growth limit domestic investment and further hinder economic prospects,” it said. First Holdco YTD Return Tightens as Share Price Slips
