Nigeria’s Eurobonds on the Sidelines as Global Bond Surge Omits Africa’s Economic Giant

Nigeria finds itself on the periphery as investors eagerly embrace debt offerings from other nations.

While Mexico and Indonesia, Nigeria’s MINT peers, join corporations in recording a historic $24.4 billion issuance within the first four days of 2024, the spotlight eludes Africa’s largest economy.

Contrary to the soaring enthusiasm in the global debt market, Nigeria’s Eurobonds present a different narrative. Yields on each outstanding Eurobond have witnessed an upward trajectory this year, signaling a lack of traction among foreign investors.

The yield on the government’s $1.25 billion Eurobond issued in 2022 climbed to 10.4 percent on  Wednesday from 10.08 percent it opened the year.

The Eurobonds facing imminent maturity suffered the most significant increases. The yield on the $1.5 billion bond set to mature in November 2027 surged by 70 basis points.

While easing global interest rates have driven a resurgence of appetite for emerging-market debt, Nigeria grapples with acute dollar shortages, casting a shadow over its potential Eurobond issuance.

Investors remain wary, expressing doubts about the government’s ability to swiftly bolster its dollar revenues.

A substantial portion of the oil earmarked for production in 2024 has already been committed to forward sales, adding complexity to the situation.

“The FX shortage is top of everyone’s mind when they think about Nigeria, although there’s a lot more optimism that the crisis stands a better chance of being resolved today than at any other point in the last eight years,” stated a London-based fund manager.

The foreign exchange backlog, a longstanding concern that kept investors on the sidelines, has seen partial resolution, signaling a potential shift in Nigeria’s FX policy.