The sovereign dollar-denominated bonds of Nigeria experienced a significant surge in value on Tuesday, following an announcement by newly inaugurated President Bola Tinubu during his swearing-in ceremony on Monday. President Tinubu expressed his intentions to eliminate the burdensome fuel subsidy and urged the central bank to strive for a unified exchange rate. This declaration sparked a positive market response, leading to an upward trajectory for Nigeria’s sovereign dollar-denominated bonds.
Eurobonds demonstrated a notable increase, surging by as much as 2.94 cents in the dollar. Specifically, the maturity set for 2029 witnessed a rise to 87.31 cents as of 1215 GMT. Notably, the corresponding yield stood at 11.41%, marking its lowest level since the conclusion of January.
The Nigerian naira currency reached unprecedented lows against the U.S. dollar in the forward markets, with the three-month forward rate reaching 564 nairas to 1 dollar. Simultaneously, Nigerian stocks experienced a notable increase, surging by 4% and reaching a level not seen in over two months, as indicated by the.NGSEINDEX.
Tinubu assumes office amidst ongoing court disputes from his main rivals over the legitimacy of his victory. He faces the daunting task of addressing several pressing challenges, including record levels of debt, foreign exchange constraints, fuel shortages, elevated inflation not witnessed in nearly two decades, inadequate power supply, and declining oil production resulting from crude theft and insufficient investment.
According to Tajudeen Ibrahim, the Director of Research at Nigerian investment firm Chapel Hill Denham, there is a prevailing sense of optimism in the market regarding the newly elected president and his proposed reform initiatives.
On Tuesday, the debt office announced its intention to issue a new 30-year bond in the local market next month. This strategic move aims to extend the maturity profile of the government’s debt and enhance domestic borrowing efforts.