Nigeria Bond Investors Suffer As Nigeria Oil Prices Slip

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Written by Robert Brand | From Bloomberg

Nigeria bondholders are missing out on the global rally in fixed income as the African nation reels from the collapse in oil prices and a sliding currency.

Average yields on naira government debt soared 2.5 percentage points in the past three months, compared with a drop of 47 basis points for emerging-market local-currency securities, according to Bloomberg indexes. Nigerian bonds were the worst performers after Russia among 31 developing nations in the period, losing 16 percent for dollar investors.

With Nigeria dependent on crude exports for 70 percent of government revenue, the 60 percent drop in prices since last year’s peak in June has sparked investor outflows that policy makers have tried to stem by devaluing the naira and raising interest rates to a record 13 percent. With an election next month, markets are seeking assurances that officials are ready to cut spending and devalue the currency again, steps needed to revive the economy, according to Standard Bank Group Ltd.

“Are investors starting to get spooked? I think so,” Nema Ramkhelawan-Bhana, an economist at Rand Merchant Bank in Johannesburg, said by phone on Jan. 14. “The broad market weakness in Nigeria indicates there is concern.”

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