Nigerian Eurobonds eased on Wednesday in an extension of the previous session’s decline, as news of the government’s decision to ban the upward adjustment of gas station prices continued to rock the market.
The country’s bonds, which dramatically became the benchmark among its emerging market peers after Bola Tinubu abruptly announced the end of fuel subsidies at his presidential inauguration in late May, are now the worst performers in that class.
The dollar-denominated note due 2051 lost 2.4 percent, or 1.7 cents on the dollar, to 68.9 cents, only managing to recoup a third of the drop as of 11:45 WAT.
An hour earlier, eight of Africa’s largest economy bonds had ranked among the world’s 20 worst-performing bonds in London. Nigerian Eurobonds with a 2033 maturity date have depreciated tenfold in less than two weeks.
Tinubu on Tuesday froze the rise in retail gasoline prices for now after hints of a possible rise from sellers, especially in the commercial capital Lagos, where gas stations were already hoarding fuel and halting sales.
“The President wishes to reassure Nigerians, following the announcements of the Nigerian National Oil Company Limited (NNPC) just yesterday, that there will be no increase in the price of alcohol pump for petroleum motors in any part of the country,” said Ajuri Ngelale, presidential spokesperson, in an emphatic note in a broadcast.
The move differs from the recent deregulation of the downstream energy sector, the highlight being the bold removal of subsidies, unpopular but market-friendly.
The removal, along with reforms aimed at weakening the naira, will put a big drain on the government’s stock market and help the oil-dependent economy save 21 trillion naira ($28 billion) over two years, the World Bank said. it’s a statement. report in June.
That sum is more than the combined cash needed to build three of the country’s main rail lines, including the Lagos-Kano Line ($11.3 billion), Lagos-Calabar Line ($11.2 billion) and Abuja-Itakpe-Warri Line ($3.9 billion).
Analysts are concerned that Nigerian dollar bonds are unlikely to find the anchor that led to their June breakout and also helped restore some measure of investor confidence in the near term.
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The central bank’s seven-year audited financial reports covering 2016 to 2017, released last Thursday, uncovered debt obligations in the region of $13 billion with foreign creditors, most of the transactions previously unknown to the public.
That, included in Nigeria’s balance of external reserves, leaves a net balance of $16.3 billion, contrary to the long figure of more than $30 billion.
The country’s credit ratings, when they are next published, will be affected by the audit disclosure, a development that could further turn investors away from its dollar bonds.
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