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Nigeria Eurobond Yields Fall

By on August 2, 2011

Nigeria’s dollar-bond yields retreated to a record as low domestic debt levels in sub-Saharan Africa’s second-biggest economy relative to Europe boost the asset’s allure.

The yield on the 6.75 percent Eurobonds due 2021 of Africa’s biggest oil producer fell for a third day, losing four basis points, or 0.04 percentage point, to 5.72 percent, the lowest level since the debt was issued in January, as of 4:47 p.m. in London, according to data compiled by Bloomberg. The bonds’ price gained 0.3 percent to 107.458 cents on the dollar. The $500 million of bonds are Nigeria’s only international notes.

The federal government’s domestic debt rose to 5.21 trillion naira ($34 billion) at the end of June, from 4.87 trillion naira as of March, according to statements on the website of the Abuja-based Debt Management Office. Nigeria has an overall debt-to-GDP ratio of around 23 percent, said Razia Khan, the London-based head of African economic research at Standard Chartered Bank Ltd. The eurozone’s average debt as a percentage of GDP was 85.1 percent by the end of 2010, according to Eurostat.

“Although domestic debt has been rising steadily and it’s overall debt to GDP ratios are now 22 percent to 23 percent from really minimal levels a few years ago, that would be still considered attractive in the overall global context,” Khan said by phone today. Yields falling “really reflect the size of investor appetite relative to how little there is still.”