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Nigeria’s dollar bond yields fell to a record low

By on July 27, 2011

Nigeria’s dollar bond yields fell to a record low as demand for higher-yielding assets rose after officials approved an aid payment to Greece to prevent a default and the naira gained after an inflow curb was lifted.

The yield on the 6.75 percent Eurobonds of Africa’s biggest oil producer due 2021 fell nine basis points, or 0.09 percent to 5.961 percent, the lowest level since the debt was issued in January, as of 4:27 p.m. in London, according to data compiled by Bloomberg. The bonds’ price gained 0.6 percent to 105.685 cents on the dollar. The $500 million of bonds are Nigeria’s only international notes.

“We see the ongoing rally of the Eurobond as the result of a rebound in global sentiment as well as an improving consensus view on Nigeria,” Alan Cameron, an economist at CSL Stockbrokers Ltd. in London said in an e-mailed response to questions today. “The recent removal of the one-year holding period on foreign investment into the bond market is an important factor, as is the recent appreciation of the naira.”

Nigeria’s naira has appreciated 2.5 percent to 152.8 per dollar since June 23 after central bank Governor Lamido Sanusi announced that the nation would lift a requirement for foreign investors to hold local-currency investments in government securities for at least one year from July. Europe’s finance ministers authorized an 8.7 billion-euro ($12.6 billion) loan payout to Greece by mid-July and said they would aim to complete talks with banks on maintaining their Greek debt holdings within weeks.

Rating Upgrade

West Africa’s most populous nation is rated B+ by Standard & Poor’s and BB- with a “negative” outlook by Fitch Ratings. Fitch may upgrade its outlook within the next 12 months to 18 months because of the creation of a sovereign wealth fund that may help the country save more of its oil revenue and funnel money into projects, Morgan Stanley said in a report June 28.

Nigeria’s economy may overtake South Africa’s by 2025 to become the biggest on the continent as oil prices climb and consumer spending in the nation expands, Morgan Stanley said.

A militant Islamic sect killed 10 people in bomb and gun attacks yesterday in Nigeria’s northeastern city of Maiduguri, Major-General Jack Nwaogbo, commander of a military task force in charge of security in the region, said today by phone.

“Although outbreaks of violence in the North have been more frequent than usual, they are part of a well known problem, and one which does not typically have much impact on markets,” said Cameron.