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Debt pile up looms as foreign investors snub Nigeria’s Naira bonds

Bloomberg report has raised serious issue on the reigning Nigeria’s naira bond currently in the market for subscribers. The report is unfortunately coming as news of oversubscription of Nigeria’s Eurobond to the tune of $3 billion raises the spirit of Nigerians.

Bloomberg said foreign investors are avoiding Nigeria’s Naira denominated fixed income investment instrument, and opting for the Dollar denominated Eurobond instead after Debt Management Office (DMO) floated a $500 million Eurobond last Wednesday which was oversubscribed to the tune of $3 billion.

According to the report, “The Eurobond was positive for Nigeria,” said Lutz Roehmeyer, a fund manager at Landesbank Berlin Investment GmbH, which owns Nigerian dollar debt but has sold all its naira securities.

“But it is almost impossible to unwind naira trades. That’s why we completely exited local bonds. As long as foreigners like me think in this way, nobody will invest in the local currency.”

The development among investors has greatly influenced the Nigerian stock negatively as the oversubscribed Eurobond has earned investors a total of 14 percent in the past year. Investors holding the naira-denominated notes were reported to have lost 37 percent in dollar terms during the year in review.

The low patronage of the Naira-denominated notes has also affected the Nigerian stocks which hold the record for the world’s worst performers, losing 35 percent in the year under review.

Bloomberg on a possible fix for the current situation noted that the country could change the tides if it lets uits currency drop.

Roehmeyer said: “There’s an easy fix.

“You just have to look at what Egypt did when it floated the pound in November. That would do the trick in Nigeria. If the naira was free floating, like in Egypt it would overshoot, maybe to 450 per dollar or even 500. Then, it would appreciate to about 400.”

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