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Nigerian bonds, stocks rally as observers see voting as peaceful

By on April 1, 2015

Nigerian bonds extended a rally, sending Eurobond yields to three-month lows, and stocks rose as voting in elections went more peacefully than anticipated, spurring investors to buy assets before final results are announced.

According to Bloomberg, more than three shares climbed for every one that fell on the Nigerian Stock Exchange (NSE) All Share Index monday  as observers from the European Union and Commonwealth said presidential and parliamentary elections last weekend were generally peaceful and transparent. Yields on $500 million of Nigerian dollar bonds due July 2023 fell for the eighth day to the lowest since December 10.

Investors encouraged by the lack of violence are taking “early positions” in anticipation prices will rise, Ayodeji Ebo, head of research at Afrinvest West Africa Limited told Bloomberg.

“They are trying to increase their exposure, knowing that if there’s no post-election violence the only direction for the market will be upwards.”

The election, a key test of stability in Africa’s largest oil producer, pitted President Goodluck Jonathan, 57, against a united opposition led by former military ruler Muhammadu Buhari, 72.

There was no evidence of a systematic manipulation of the process in the latest elections, an EU observer mission said in preliminary findings. Violence in Rivers state shouldn’t place the overall integrity of the election in doubt, the EU observer said.

Yields on the 2023 Eurobonds fell 4 basis points to 6.47 percent as of 4:08 p.m. in London. Rates on 489 billion naira ($2.5 billion) of bonds due March 2024 fell 37 basis points, to 15.38 percent, the lowest since Feb. 9, according to data from the Financial Markets Dealers Association.

A 1.7 per cent advance in the NSE All Share Index extended gains in equities over the past seven days to 6.3 per cent to the best level since March 11. The measure is still down 10 per cent this quarter, the most among African gauges tracked by Bloomberg. It is trading at 8.5 times estimated earnings, the lowest on the continent after Zimbabwe.

The naira weakened as much as 0.2 per cent to 199.50 per dollar before erasing losses to trade unchanged at 199.05.
“The market is reacting to the fact that the election has come and gone with little or no violence,” Pabina Yinkere, head of research at Lagos-based Vetiva Capital Management said.

“It is a situation that both local and foreign investors are happy with.”
Fitch Ratings cut Nigeria’s credit-rating outlook to negative from stable on Monday, citing falling oil prices and rising political risks.
With a more than 50 per cent slump since June in prices for oil, which provides two-thirds of government revenue and 90 percent of foreign income, the naira has lost 18 per cent against the dollar in the past six months, the steepest decline among 24 African currencies tracked by Bloomberg.

“Political uncertainty is heightened in the context of a tightly contested presidential election and potential transition issues,” Fitch said in a statement, while affirming Nigeria’s B+ rating, three steps below investment grade. “Fiscal and external buffers have been eroded significantly as Nigeria enters a period of lower oil prices.”

 

[ThisDay]