Nigeria’s ten -year Eurobond closed in the first half of the year at a yield of 13.45% or $ 69.8 in share price indicating one of the best yields in years for the African economy. .
Sovereign Eurobond prices are often thought of as junks that indicate they are unsafe to buy or unsuitable to fixed buyers for a number of reasons.
Growing markets such as Nigeria have seen fixed prices fall after the Russia-Ukraine war and the US Fed’s decision to raise prices to combat rising inflation. A Financial Times article reported that about $ 50 billion was pulled out of the stock market at a time when it was more difficult to borrow at a reasonable price.
No more Eurobonds?
Nigeria backed the Eurobond market in March when it borrowed $ 1.25 billion in a 7-year bond at a total value of 8.375%.
However, analysts believe it is not possible to go to another credit cycle considering the higher debt costs.
The news continues after this announcement
In Nigeria, The situation is much better with the 10-year Eurobond currently selling at a higher yield than its local currency counterpart. For example, the 10-year FGN Bond closed in April 2032 in June at a yield of 12.5% year-on-year close to 100 basis points lower than the 10-year Eurobond Yield.
- The reasons are clear; With securities in the market more than 13%, the price would be higher if he decides to re -enter that market if the price of foreign loans is higher. and compared with local currencies.
- The problem of conversion is a combined idea that it would be foolish to seek out loans.
- The government is also aware of this despite statements by officials confirming the country will not be able to hit the Eurobond market given the current realities.
Nigeria’s DG of the debt management agency, Patience Oniha confirmed at a financial conference in June that Nigeria has no plans to take out borrowing from the Eurobond market this year as it changes its focus on home lending and obtaining from concessional sources.
The news continues after this announcement
“Once we realized where the market was facing the problems we needed to address in Covid-19’s terms, we developed both in-home and out-of-concessional lending. We have not put in the planning for this year to enter the global market. We do not know how long we will be there. what is the cost and all the countries that come to market are the economy so we don’t want to take any time. “ Oniha’s patience
Nigeria’s Eurobond is currently in existence $ 15.9 billion and represented about 39.8% of the total $ 39.9 billion foreign debt consolidation
What is this idea for the lack of forex
With Nigeria’s inability to control the Eurobond market, and the theft of crude oil, the country is unable to finance new demands for forex.
- Nigeria’s foreign reserves are around The $ 39 billion was raised to about $ 6 billion last year due to foreign debt.
- However, acquiring forex is a serious challenge because the central bank continues to allow businesses to establish their forex rather than fire its holdings.
- The reduction in foreign debt could cost a lot of money if Nigeria could not make a lot of money from buying oil in the coming months.
- The Nigerian economy relies heavily on oil sales, foreign imports, and loans to boost its financial value.
- Another option may be the unwanted IMF or Multilateral loans that often come with strict conditions.
Nigeria’s central bank sells forex through the window and the retailer but it is the only major supplier, the water is stagnant because traders don’t think the rice is showing up. in fact.
Nigerian business This is one of the main reasons for the influx of foreign currency, however, demand for the market is increasing now that the cost of national loans is rising by two figures.
- This leaves Nigeria with a market that is now in its third year of entry by foreign investors.
- Foreign investors have left the market after the central bank re -issued monetary powers following the opening of expensive OMO bills.
- The CBN is unlikely to issue OMO bills at the prices sold in 2019.
This leaves forex traders There is no choice but to seek forex on their own in the face of the most expensive price. For both business travelers and vacationers, private travel lessons are available but the wait can be longer, especially between the summer holidays.