International Lender,UBS Ends Coverage of Five-bank Eurobonds on Liquidity

UBS has withdrawn its fixed-income research coverage of Nigeria’s banks, as international investors increasingly shun Africa’s biggest oil producer and economy,a source privy to the development revealed.

The lender cut its coverage of five banks, including Guaranty Trust Bank and Zenith Bank, Nigeria’s two biggest lenders by market value, citing a lack of liquidity in their Eurobonds, said the person, who asked not to be identified because it hasn’t been made public.

Access Bank, Diamond Bank and FBN Holdings, owner of First Bank of Nigeria, were the other lenders affected, said the person.

JPMorgan removed Nigeria from its local-currency emerging-market bond indexes, tracked by more than $200 billion of funds, in September, because of central bank curbs on currency trading that made it difficult for foreign investors to buy and sell naira debt. Barclays followed suit about two months later with its equivalent bond index.

Those trading restrictions, which the central bank has had in place for almost a year to support the naira’s peg of roughly 197-199 to the dollar, may also cause Nigeria to be removed from the MSCI Frontier Markets Index of stocks, Charles Robertson, the chief economist at Renaissance Capital, said in a note to clients Feb. 10. Nigeria has the second-biggest weighting in the gauge after Kuwait.

Nigeria, which derives most government revenue and almost all export earnings from oil, has been battered by the slump in crude prices to 12-year lows. Economic growth slowed to 3 percent last year, the least since 1999, according to the IMF. — Paul Wallace, Bloomberg New.