Bloomberg News

Nigerian Yields Drop to Almost 4-Month Low as Bank Lifts Curbs

July 01, 2011

July 1 (Bloomberg) -- Nigerian bonds climbed for a second week, with yields trading at the lowest in almost four months, after the central bank said it would today lift a curb on foreign investors’ debt holdings.

The 5.5 percent debt due 2013 of Africa’s biggest oil producer reached 9.35 percent yesterday, two basis points from the lowest since March 4, according to data from the Financial Market Dealers Association on Bloomberg.

The naira may strengthen to 145 per dollar by the end of the year after policy makers decided to remove a requirement for foreign investors to hold local-currency investments in government securities for at least a year starting today, Central Bank of Nigeria Governor Lamido Sanusi said June 23.

“We expect yields to keep downwards due to inflow from foreign investors that can now hold debt positions and exit at will,” Wale Abe, chief executive officer of the FMDA, which groups lenders’ trading in the money market, said by phone.

Nigeria had 4.5 trillion naira ($29.6 billion) in outstanding debt in 2010, or 15.6 percent of gross domestic product, Morgan Stanley said in a report this week, citing the Ministry of Finance. This may rise to 16.7 percent of GDP in 2012, a “comfortably low level,” they said. Nigeria’s external debt level is 2.4 percent of GDP and may rise no more than 3.8 percent by 2012, Morgan Stanley said.

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.

--With assistance from Chris Kay in London. Editors: Ana Monteiro, Linda Shen

To contact the reporter on this story: Emele Onu in Lagos at eonu1@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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