Investors in Nigeria wait for newly elected President Bola Tinubu to take decisive action to repair the country’s finances and stop the eight-year economic downturn under his predecessor Muhammadu Buhari. Bond prices remain stable.
The yield on the country’s 2051-dated dollar bonds increased by 0.1% as of Wednesday at noon in London. This brings it to 12.1%. The JPMorgan indexes have revealed that the premium investors have to pay for holding Nigerian debt compared to US Treasuries has dropped from an average of 812 this year to 769, showing an increase of 2 basis points.
Credit markets also indicated that investor worries had dissipated. For the past four sessions, the price to protect against a government default has decreased by more than 60bps. It reached its lowest level since February 1 on Wednesday, when it plummeted to 676.
Despite the nation’s increasing financial troubles, the newly elected president, has not given much consideration to the matter.
What are the new president’s priorities?
The top item on the agenda is a fiscal crisis brought on by an expensive and unsustainable gasoline subsidy. It will likely deplete the state’s coffers of 6T naira ($13B) this year. Investors also expect the president to take action to converge Nigeria’s divergent exchange rates.
Samir Gadio is the head of Africa strategy at Standard Charter Bank in London. He stated that there is still tremendous relative value in Nigerian dollar bonds when compared to peers. There is the potential for a greater Nigerian eurobond surge in 2021 if the market conceives that faster advancement on subsidy and FX changes will be done.
On February 25, Tinubu received 35.2% of the vote. They announced the results on Wednesday. Two of the major opposition parties boycotted the vote count as errors and delays hampered it in compiling results.