Skyrocketing interest rates had spooked Nigeria and other developing countries from the international bond market.
Although emerging facts revealed that with rates easing, debt appetite may rise again.
According to the data published by the Debt Management Office, the yields on each of its outstanding Eurobonds have all gone up this year.
The yield on the government’s $1.25 billion Eurobond issued in 2022 rose to 10.4 percent Wednesday compared to 10.08 percent where it opened on the first trading day of 2024.
However, foreign investors are showing no interest in Nigerian debt at a time when they are lapping up other emerging-market dollar bonds.
Although, appetite for emerging-market bonds have soared this year, with borrowers taking the opportunity to sell record bonds to investors who are hunting for higher returns amid a slowdown in US interest rates.
For instance, the first four days of 2024, some $24.4 billion worth of bonds were sold by emerging-market governments from Mexico and Indonesia as well as corporates.
This already presupposes the busiest start to a year on record for dollar and euro-denominated debt issuance out of developing nations, according to Bloomberg data.
Nigeria, on the other hand, which would have been tempted to tap the Eurobond market to ease a chronic dollar shortage, is not getting the same attention as other developing markets.
The Eurobonds with the closest maturity among the outstanding bonds suffered the biggest increases. The yield on the $1.5 billion bond maturing in November 2027 rose by 70 basis points, the highest among the bonds, followed by the $1.1 billion bond maturing in November 2025 which rose by 60 basis points.
High interest rates had spooked Nigeria and other developing countries from the international bond market but with rates easing, debt appetite is rising again. With the 10-year US rate falling back to the 4 percent area, the mood is different from both borrowers and investors.
In Nigeria’s case however, acute dollar shortages seem to be overshadowing lower interest rates. Nigeria is indeed making moves to restore investor confidence in its foreign exchange market after eight years of carnage.
For instance, the Central Bank of Nigeria (CBN) cleared a part of the FX backlog that has kept investors on the sidelines and has signalled a new direction for FX policy following the big devaluation in the naira last June. Airlines and international banks are among those that have been settled.
The naira has been allowed to weaken to as low as N1,000 per US dollar in the official market as the CBN aims for real price discovery. Whilst the $2.25 billion facility from African Export-Import Bank (Afreximbank) and other investors has not yielded the expected results in stabilising the naira.
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