After experiencing its first recession in a quarter of a century, with currency crisis and budget shortfalls driven by low oil prices which led the Nigerian economy to shrink by 1.5% in 2016, investors seem to be lining up to buy Eurobonds Nigeria considering her recent economic recovery.
The prospect of investing in Africa’s most populous country is very attractive, considering the country is benefiting from bottled up demand for African sovereign debt. With Emerging markets starting last year on a very bad note, issues such as depressed currencies, looming interest-rate increases and uncertainty over British and American votes arose, putting investors off risky trades, resulting to the African sovereign bonds suffering more than most.
As at February this year, Nigeria’s return to the Eurobond market received an enthusiastic response following a $1 billion offering that ended up being almost eight times oversubscribed.
More recent is the sale of the highest yielding Eurobond from emerging markets this year, Nigeria’s Fidelity Bank Plc sold $400 million of bonds with 10.75% yield, joining a rush for issuance before higher U.S. interest rates push up borrowing costs. According to Bloomberg, the Eurobond is the first from Fidelity, which is rated B- by S&P Global Ratings and Fitch Ratings, or six steps into junk territory, since 2013.
Perhaps, Nigeria’s effort to reduce opportunities for sleaze by merging multiple treasury accounts into single account, improve tax collection and ultimately diversifying its economy has put the African giant on investors’ radar.