Nigeria’s US Dollar Bond Yield Rises to 10%
The average yield on Nigeria sovereign Eurobond rose by nine basis points on Monday following selloffs in the international debt capital market ahead of inflation report for the month of May, 2024.
The uptick, according to fixed income analysts, followed sell down in Nigeria US dollar bonds across tenor instrument trading in the international debt market secondary segment.
Foreign investors appear to be weighing changing macroeconomic dynamics in Nigeria with expectation that inflation and interest rate would remain elevated in the first half of 2024.
Exchange rate has worsened beyond market expectations as a result of surging demand for foreign currency for import bills payment. On the other side, the forex market is facing sustained US dollar liquidity challenges. This has persisted despite the apex bank intervention.
The good, or rather the bad news depending from whose side is being viewed is that the decision to float the naira comes with elimination of capital control measures.
The free movement of foreign currency, in and out, of the country has reflated foreign investors’ confidence. However, historical antecedent confirmed this hasn’t helped the country in FX management.
With the macroeconomic data, foreign investors have been seeking rates on Nigeria’s assets repriced to compensate for high inflation and double digit high interest rate. On the contrary, spot rates on OMO, Nigerian Treasury bills have been on decline since apex bank lure foreign portfolios investors into the market in March – with high spot rates on bills.
In its market update, Cowry Asset Management limited told investors that the sovereign Eurobonds market was predominantly bearish across maturities, thus pushing the average yield higher by 9bps to 9.99%. FGN Bond Yield Rises to 18.75% Ahead of Inflation
