Nigeria’s long-dated Eurobond yield has risen above 8 percent as higher US Treasury yields and persistent inflation concerns put pressure on longer-maturity debt in global markets.
The yield on Nigeria’s September 2051 Eurobond has climbed in recent weeks, reflecting the broader rise in long-term global bond yields as investors reassess the outlook for inflation and interest rates.
Victor Ogundijo, a fixed-income analyst at CardinalStone, said the recent increase was driven largely by movements in global benchmark yields rather than a significant deterioration in Nigeria’s sovereign risk.
“Long-end yields generally are weighed by the global macros,” he said.
He said the prolonged war in Iran was sustaining inflationary pressures, while uncertainty over the pace at which the US Federal Reserve can bring inflation back to target was feeding expectations of higher-for-longer interest rates.
This has pushed up yields on longer-dated US Treasuries, with the effect spilling into other debt instruments that are priced against them. Recent market moves have seen US Treasury yields rise amid renewed geopolitical tensions, higher oil prices and persistent inflation concerns.
The impact has been particularly pronounced at the long end of Nigeria’s Eurobond curve, where investors are more sensitive to changes in global benchmark rates.
Ogundijo explained that an examination of the spread between Nigeria’s 2051 Eurobond and comparable US Treasury yields shows that Nigeria’s risk premium has not widened significantly.
“Overall, I wouldn’t say Nigeria’s spread has really widened. The move is more for the USTs themselves,” he said.
A wider spread would have suggested that investors were demanding significantly more compensation to hold Nigerian debt relative to US Treasuries, potentially pointing to rising concerns over Nigeria’s sovereign credit risk.
Instead, the relatively limited movement in the spread suggests that much of the increase in Nigeria’s long-term Eurobond yield has been driven by the global rise in benchmark yields.
The development comes even as the broader Nigerian Eurobond market has shown some strength. Meristem Research said average yields across its tracked Nigerian Eurobonds declined by four basis points to 6.90 percent, supported by a broad-based rally.
The divergence highlights the sensitivity of longer-dated Nigerian debt to global interest-rate expectations, even when the wider Eurobond market is performing better.
For Nigeria, sustained increases in global long-term yields could raise the cost of accessing international debt markets, particularly if the government seeks to refinance or issue new dollar-denominated debt.
However, the current movement does not, on its own, point to a sharp deterioration in investor confidence in Nigeria, given the relatively stable spread over US Treasuries.
COURTESY: Businessday
