Nigeria’s dollar bond yields fell to a record as its debt stock is low compared with that of European peers and on expectations Ngozi Okonjo-Iweala, a managing director at the World Bank, will help spur policy changes to encourage investment when she returns to the Cabinet.
The yield on the 6.75 percent Eurobonds due 2021 of Africa’s biggest oil producer fell two basis points, or 0.02 percent to 5.87 percent, the lowest level since the debt was issued in January, as of 2:32 p.m. in London, according to data compiled by Bloomberg. The bonds’ price gained 0.1 percent to 106.313 cents on the dollar. The $500 million of bonds are Nigeria’s only international notes.
The federal government’s domestic debt rose to 5.21 trillion naira ($34 billion) at the end of June, from 4.87 trillion naira as of March, according to statements on the website of the Abuja-based Debt Management Office. The amount is equivalent to 15.3 percent of 2011 gross domestic product based on National Bureau of Statistic estimates, said Gregory Kronsten, head of macroeconomic and fixed income research at FBN Capital Ltd. The eurozone’s average debt as a percentage of GDP was 85.1 percent by the end of 2010, according to Eurostat.
“It’s still very, very low” compared to European peers, Kronsten said by phone from London today. “It’s still pretty strong credit Nigeria, the strength is the external balance sheet and public indebtedness and reserves.”
Nigeria’s foreign reserves increased 5.3 percent this month to $33.5 billion as of July 26. This is down from $37.6 billion a year ago, according to Central Bank of Nigeria data. Africa’s most populous nation is rated B+ by Standard & Poor’s and BB- with a “negative” outlook by Fitch Ratings.
Reform Expectations
President Goodluck Jonathan, who was returned to power in April elections, slashed almost 500 billion naira off a budget adopted two months earlier, taking the final spending plan to 4.5 trillion naira. Nigeria’s Senate passed a bill last month creating a sovereign-wealth fund to help the country save more of its oil revenue and funnel money into projects.
“There’s a feeling this presidency might actually achieve something,” said Kronsten. “There are quite high expectations of reforms” as Okonjo-Iweala leaves her World Bank post mid- August to become coordinating minister for the economy and minister of finance in Nigeria, the Washington-based lender said July 8.
As Nigeria’s finance minister from 2003 to 2006, Okonjo- Iweala spearheaded talks that led the Paris Club group of creditors to write off $18 billion in Nigerian debt. At the World Bank since 2007, she had special oversight for work in Africa, eastern Europe, and central and South Asia
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