Nigerian bonds rallied are the best performers in Africa in March after registering a 2 percent return this month the most among 31 emerging markets after Russia and the Dominican Republic, according to Bloomberg indexes.
The rally could however be short lived as the Africa’s biggest economy slides towards junk status weighed down by falling oil prices on the global market, its main export commodity, and a closely contested election that’s threatening to turn violent regardless of the outcome.
Several global monitoring agencies, including Standard & Poor’s and the World Bank, have cut their rating or forecast on the Nigerian economy this year.
“A downgrade worsens public and investor perception of the economy, which is already being hit,” Kunle Ezun, an analyst at Ecobank Transnational Inc., told Bloomberg.
Nigeria raised 91 billion naira ($455 million) in bonds two weeks ago, with maturities ranging between 5-year and 20-year at higher returns across the board, Reuters reported.
Morgan Stanley, which sold all its naira government bonds last year, said it may start buying again in the second quarter if Nigeria devalues the currency and lifts foreign-exchange trading restrictions.
The Nigerian central bank, which has been hawk eyed to stem any fall in the local currency, is likely to devalue the naira as pressure mounts on it. The Naira has lost 18 percent against the dollar in the past six months. Only Zambian Kwacha has performed worse than that with a 24 percent decline according to Bloomberg Data.