By Agency Reporter

JP Morgan has raised Nigerian external bonds to overweight in its model portfolio, citing high oil prices and the likelihood that April elections will pass off smoothly, returning incumbent President Goodluck Jonathan.

Reuters quoted a statement by JP Morgan as saying, “Elections should not be destabilising with Goodluck Jonathan being reconfirmed as President, which should lead spreads, which have lagged to tighten.

“We see 75 basis points of upside if our base-case of smooth elections with Jonathan winning materialises.”

The bank, however, warned of a 75-100 basis points downside in case of a violent outcome.

Fears of post-election chaos have prompted many investors to dump Nigerian assets, including its $500m Eurobond inaugurated in January.

JPMorgan said the bond, issued at a similar spread to Gabon, was trading 100 basis points wide as the benefit of higher oil prices has been tempered by election risks.

The EMBIG index shows Nigeria’s yield premium to United States treasuries is currently at 319 points compared to Gabon’s 245 points.

Source: Punch