The United States’ President Barack Obama has named his Secretary of State, Hon John Kerry as the head of the American "Presidential delegation" to the inauguration of Muhammadu Buhari as the president of Nigeria, come May 29, 2015. THISDAY confirmed last night from a statement from the White House that other members of the US delegation will be announced on a later date. The United States has been specially particular in its support for the democratic growth in Nigeria. Meanwhile, Nigeria’s deteriorating fiscal position, may force the incoming Muhammadu Buhari’s administration to tap from the international capital market by issuing Eurobond. A rally that drove yields on Nigerian Eurobonds to six-months low has created an opportunity for the president-elect’s government to tap international markets soon after he is sworn in on May 29, Bloomberg reported monday.
Rates on Nigeria’s $500 million of securities due July 2023 fell to 5.45 per cent this month, the lowest since November 4. Yields have dropped by more than 300 basis points since reaching a record high of 7.83 per cent on February 11. Nigerian dollar debt has returned seven per cent this year, compared with the 2.8 per cent average for peers in Africa and the Middle East, according to data compiled by Bloomberg.
While incumbent President Goodluck Jonathan’s administration mostly issued local-currency bonds, a budget deficit that’s widening as low oil prices starve Africa’s biggest crude producer of cash means new sources of funding may be needed.
Lower dollar yields make Eurobonds more enticing than naira debt, according to an economist at Renaissance Capital, Yvonne Mhango
The West African nation has sold Eurobonds twice, most recently in July 2013.
“Nigeria will have to pursue the external financing option more so than they’ve done previously,” Mhango said.
“That’s because the financing gap will be much bigger than before. Also, yields have come in nicely. That’s an opportunity for them to go that route.”
Whether Nigeria’s debt rally continues will depend on crude prices and Buhari’s success in carrying out his pledges, including a vow to boost transparency and production in the oil industry, according to a managing director at Los Angeles-based TCW Group Incorporated, Brett Rowley.
“Investors hope he will make good his campaign promises to crack down on corruption and implement structural reform, particularly in the oil sector,” Rowley, who helps oversee $160 billion of assets including Nigerian Eurobonds, said.
Nigeria would benefit from its low debt levels if it did tap international capital markets, according to the Head of Africa Economic Research at Standard Chartered Plc, Razia Khan.
The ratio of debt to gross domestic product is 10.7 percent, according to Barclays. That compares with 67 per cent for Ghana and 44 per cent for South Africa. Foreign debt amounts to 1.7 percent of GDP, compared with nine percent for naira-denominated borrowings, according to Barclays Plc.
“Anyone looking at Nigeria’s situation would say there’s a case for external borrowing,” Khan had told reporters in Lagos recently.
Spokesman for the Coordinating Minister of the Economy and Minister of Finance, Paul Nwabuikwu and Garba Shehu, a media aide to Buhari, didn’t immediately respond to e-mailed requests for comments.
Average yields on naira-denominated bonds dropped to 13.9 per cent on May 14 from more than 16 per cent in mid-March, just before the election. They are still the highest among 31 emerging markets tracked by Bloomberg. Yields on the nation’s 2023 Eurobonds climbed 5 basis points to 5.70 per cent by 8:13 a.m. in Lagos.
Nigeria’s government, which derives 70 per cent of its revenue from oil exports, has a “cash-flow crunch” and has already borrowed more than half the amount it budgeted for the full year, the Finance Minister, Dr. Ngozi Okonjo-Iweala said recently.
Rates on Nigeria’s $500 million of securities due July 2023 fell to 5.45 per cent this month, the lowest since November 4. Yields have dropped by more than 300 basis points since reaching a record high of 7.83 per cent on February 11. Nigerian dollar debt has returned seven per cent this year, compared with the 2.8 per cent average for peers in Africa and the Middle East, according to data compiled by Bloomberg.
While incumbent President Goodluck Jonathan’s administration mostly issued local-currency bonds, a budget deficit that’s widening as low oil prices starve Africa’s biggest crude producer of cash means new sources of funding may be needed.
Lower dollar yields make Eurobonds more enticing than naira debt, according to an economist at Renaissance Capital, Yvonne Mhango
The West African nation has sold Eurobonds twice, most recently in July 2013.
“Nigeria will have to pursue the external financing option more so than they’ve done previously,” Mhango said.
“That’s because the financing gap will be much bigger than before. Also, yields have come in nicely. That’s an opportunity for them to go that route.”
Whether Nigeria’s debt rally continues will depend on crude prices and Buhari’s success in carrying out his pledges, including a vow to boost transparency and production in the oil industry, according to a managing director at Los Angeles-based TCW Group Incorporated, Brett Rowley.
“Investors hope he will make good his campaign promises to crack down on corruption and implement structural reform, particularly in the oil sector,” Rowley, who helps oversee $160 billion of assets including Nigerian Eurobonds, said.
Nigeria would benefit from its low debt levels if it did tap international capital markets, according to the Head of Africa Economic Research at Standard Chartered Plc, Razia Khan.
The ratio of debt to gross domestic product is 10.7 percent, according to Barclays. That compares with 67 per cent for Ghana and 44 per cent for South Africa. Foreign debt amounts to 1.7 percent of GDP, compared with nine percent for naira-denominated borrowings, according to Barclays Plc.
“Anyone looking at Nigeria’s situation would say there’s a case for external borrowing,” Khan had told reporters in Lagos recently.
Spokesman for the Coordinating Minister of the Economy and Minister of Finance, Paul Nwabuikwu and Garba Shehu, a media aide to Buhari, didn’t immediately respond to e-mailed requests for comments.
Average yields on naira-denominated bonds dropped to 13.9 per cent on May 14 from more than 16 per cent in mid-March, just before the election. They are still the highest among 31 emerging markets tracked by Bloomberg. Yields on the nation’s 2023 Eurobonds climbed 5 basis points to 5.70 per cent by 8:13 a.m. in Lagos.
Nigeria’s government, which derives 70 per cent of its revenue from oil exports, has a “cash-flow crunch” and has already borrowed more than half the amount it budgeted for the full year, the Finance Minister, Dr. Ngozi Okonjo-Iweala said recently.
No comments:
Post a Comment
Please leave your comment