Yields on Nigerian US dollar bonds rose slightly to 9.60% due to recent sell-offs by foreign portfolio investors trading in the Eurobond market. Concerns about Nigeria’s local economic conditions, rising debt levels, and expectations of persistent inflation throughout the year have weakened demand for Nigeria’s sovereign Eurobonds.
Following two months of slowing inflation, Nigeria saw a reversal in September, with inflation climbing again due to rising energy costs. In response, Nigerian authorities have requested the disbursement of a $750 million installment from a broader $2.25 billion loan recently approved by the World Bank.
Despite an increase in external reserves, the naira has continued its decline, casting doubt on the actual net FX balance accessible to authorities after various reserve-backed agreements.
On Monday, Nigeria’s Eurobond market experienced sell pressure across short-, mid-, and long-term maturities, leading to a 2 basis point rise and bringing the average yield to 9.60%.
The week opened bearishly for the Eurobond market, with notable selling pressure on African sovereign bonds, especially those from Angola and Nigeria, following a sharp decline in oil futures. However, some buying activity was observed in Egyptian bonds. Overall, Nigeria’s bond yields trended upwards.
Analysts expect this sentiment to continue into Tuesday, although the selling pressure may moderate slightly.
