Nigeria’s Eurobonds leads markets losses for the second day

Nigeria’s Eurobonds have experienced a second consecutive day of underperformance in the emerging-market credit sector according to Bloomberg reports.

The nation’s government’s decision to halt market forces determined fuel prices, despite the backdrop of surging crude oil costs is responsible for this decline. 

Within Bloomberg’s EM Sovereign Total Return Index, eight Nigerian bonds now rank among the 20 poorest performers globally, as of 9:45 a.m. in London.  

Specifically, notes maturing in September 2033 have suffered a 1.1-cent decline to 75.19 cents on the dollar, marking their lowest valuation since June.

Over the past 13 days, these bonds have incurred losses on 10 occasions. 

In a parallel development, a $1 billion tranche of notes set to mature in January 2031 has also experienced a decrease of 1.09 cents, now trading at 84.79 cents.

This marks a continuation of its downward trajectory from the previous day when it recorded its most substantial drop since March.

Remarkably, this particular bond has encountered losses over four consecutive days, constituting its longest losing streak since April.  

President Tinubu’s reforms 

The momentum Nigeria’s bonds had previously enjoyed throughout June, following the election of President Bola Tinubu, has now encountered a significant slowdown.

President Tinubu’s initial measures were well-received by investors and bolstered confidence in Nigeria’s economic prospects.  

However, his actions, which included the removal of the costly fuel subsidy, the replacement of the central bank governor, and a restructuring of the complex multi-exchange rate system, have given way to a more complex and challenging phase of reform.

This is as food prices saw a massive jump and the naira plummeted to a record low against the USD. 

Halt in PMS price increase 

Independent petroleum marketers, citing escalating crude costs and the ongoing depreciation of the naira, have advocated for further fuel price hikes.

Although, the IPMAN President and NNPCL have come out to say publicly there is no planned increase in the pump price of fuel.  

Although the freezing of fuel price increases may serve as a temporary measure to stabilize prices, analysts view it as a potential impediment to subsidy reforms.  

Razia Khan, Head of Research for Africa and the Middle East at Standard Chartered Plc in London, speaking to Bloomberg noted, “Should this turn out to be a more permanent reversal of fuel-subsidy reforms, however, then that would be a clear credit negative, as Nigeria cannot afford the fuel subsidy in any meaningful way.” 

Adding to the challenging landscape, the public release of the central bank’s long-delayed financial statements has fueled the ongoing sell-off.

These disclosures revealed substantially lower effective foreign-exchange reserves than previously indicated, alongside undisclosed transactions totalling $7.5 billion with JP Morgan Chase & Co. and Goldman Sachs Group Inc. 

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