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Dollar scarcity could persist as Nigeria’s Eurobond trade at worst price

Nigeria’s ten-year Eurobond closed the first half of the year at a yield of 13.45% or $69.8 in unit price pointing to one of the worst yields in years for Africa’s largest economy.

Sovereign Eurobond yields at double-digit rates are often considered junks suggesting they are either unsafe to buy or unattractive to bond buyers due to several factors.

Emerging markets like Nigeria have seen bond prices fall following the Russia-Ukraine war and the decision by the US Fed to raise rates to combat rising inflation. A recent article indicates about $50 billion have been pulled out of emerging market bonds as borrowing gets harder at a reasonable cost.

Nigeria last tapped the Eurobond market in March when it borrowed $1.25 billion in a 7-year bond at a whopping cost of 8.375%.

However, analysts believe it might not be able to go on another round of borrowing considering the high borrowing cost.

For Nigeria, the situation is even worse with the 10-year Eurobond now trading at a yield higher than its equivalent in local currency. For example, the recently sold 10-year April 2032 FGN Bond closed in June at a yield of 12.5% per annum almost 100 basis points lower than the 10-year Eurobond Yield.

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