Bloomberg News

Nigeria’s Naira Declines as Bond Yields Rise on Debt Sell Off

June 11, 2013

Nigeria’s naira fell against the dollar and bond yields rose to an almost nine-month high on speculation investors sold debt amid concern the U.S. Federal Reserve will ease stimulus that boosted emerging-market assets.

The currency of Africa’s biggest crude producer declined 0.4 percent to 159.45 per dollar by 3:06 p.m. in Lagos, the commercial capital. Yields on domestic bonds due January 2022 rose to the highest since Sept. 24 yesterday, adding 26 basis points to 13.83 percent, according to data compiled by Bloomberg.

“Emerging-market debt funds are starting to face redemptions and may be forced to reduce their exposure to Nigerian debt,” Samir Gadio, an emerging-markets strategist at Standard Bank Plc’s London unit said in e-mailed comments today. “It’s in line with the correction in emerging-market debt rates” and “domestic investors are tracking the positioning of foreign investors,” he said.

Standard & Poor’s raised its outlook for the U.S.’s AA+ credit rating to stable from negative yesterday, boosting odds that the Fed will reduce its bond-buying program that fueled demand for assets in emerging markets. Currencies from Malaysia to Mexico declined today.

The Central Bank of Nigeria left its policy rate unchanged at a record high of 12 percent on May 21, concerned that spending was poised to rise as the government battles Islamist insurgents in the northeast. The bank raised the level of reserves that lenders must hold in cash to 12 percent from 8 percent in July 2012. Inflation (NGCPIYOY) has stayed under 10 percent for four consecutive months, meeting the bank’s target.

Nigeria’s Debt Management Office in Abuja, the capital, is scheduled to sell 85 billion naira ($533 million) of bonds tomorrow at an auction.

“It looks like we are going to have a significant jump in primary market yields at tomorrow’s auction,” Gadio said.

Yields on the nation’s $500 million of Eurobonds due January 2021 declined three basis points to 5.146 percent today.

Ghana’s cedi slid 0.3 percent to 2.0075 per dollar in Accra.

To contact the reporter on this story: Chris Kay in Abuja at ckay5@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net


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