April 18, 2023/Coronation Research
Global markets are becoming more stable, despite March’s shocks to the US and European banking systems. Global market stability is good for Nigeria, both for its exports and for its ability to finance itself abroad.
Global Markets, Storm Over?
Recent weeks have seen inflationary expectations in the US ease, with the result that US bond yields have moderated, and US equity markets have enjoyed support. For Nigeria, this means that in several specific areas, things are likely to get better.
Nigeria is connected to global markets in several ways. The first is, obviously, the oil price which directly influences the value of Nigeria’s principal export, the level of its foreign exchange reserves, and – to a large extent – government funding. The news here (see page 1) is good, with the oil price recovering recently. Another strong connection is between US dollar government bond yields and the yields of Nigerian Eurobonds issued by the Federal Government (FGN). As US government bond yields move upwards there are fewer reasons to buy non-investment grade Nigerian Eurobonds, so FGN Eurobond yields rise sharply. But as US government bond yields moderate, the opposite happens.
