By Ademola Alawiye with agency report

The Nigerian Eurobond rose to a record high on Tuesday following renewed interest from international investors as a result of the presidential election which took place last week.

Bloomberg reported that the Nigerian dollar denominated bonds, which is due in 2021, rose for a third day, gaining 0.3 per cent to 103.185 cents on the dollar, the highest level since the bond was issued in January.

The yield of the $500m bonds which is Nigeria’s only international notes, fell by four basis points or 0.04 percentage point to 6.3 per cent.

Prior to the presidential election, the $500m eurobond had rallied sharply with its yield premium to United States Treasuries falling, as investors bet that oil’s surge to 32-month highs would help investors overcome pre-election jitters.

The bond, which was issued in January, rose by 1.8 points in price to 103 cents on the dollar, while the yield fell by 0.4 per cent to 6.37 per cent.

Investors’ demand to hold Nigerian sovereign debt compared with US treasuries had fallen by 31 basis points to 291 basis points on JP Morgan’s EMBI Global Index 11EML of sovereign emerging bonds before the elections.

Investors had said that the elections would pass off smoothly while the oil price rise was a boom for Nigeria. The country exports two million barrels per day of sweet crude, which fetches a premium of around $4 to the Brent benchmark.

Bloomberg quoted the Head, Africa Research, Standard Chartered Bank Plc, Ms. Razia Khan, as saying, “Investors are taking a measured view of the risk, the key is that given Jonathan’s victory oil output is unlikely to be under any threat.

“The election crises were in the north and of course the oil comes from the Delta, and the Delta is firmly in support of Jonathan.”

Election jitters had caused Nigerian bonds to lag recently compared with those of African peers Ghana and Gabon. JP Morgan analysts had pointed out in a note that Nigeria was trading 100 basis points wide to fellow oil-exporter Gabon, despite their bonds having been issued at similar spreads.

JPM recently raised Nigeria to overweight in its model portfolio.

Its analysts told clients in a note, “We see 75 bps of upside if our base-case of smooth elections with Goodluck Jonathan winning materialises.”

A strategist at Standard Bank, Mr. Samir Gadio, had also said, “One needs to take into account that the continued surge in oil prices has a favourable impact on the intrinsic risk metrics associated with Nigeria’s electoral cycle.”

 

Source: Punch