Nigeria’s Eurobond Yields Fall to Record Low on Oil Price

Nigeria’s $500 million of Eurobonds jumped, with yields falling to a record low after oil added to two weeks of gains.

Borrowing costs on dollar debt due 2021 dropped 14 basis points, or 0.15 percentage points, to 5.15 percent as of 3:09 p.m. in London, the lowest since their issue in January 2011, according to data compiled by Bloomberg. Yields on the international bonds of Africa’s biggest oil producer have declined almost 1 percent this year.

Oil advanced amid concern that political tension in the Middle East may lead to a disruption in crude supplies. Nigeria depends on oil exports for more than 80 percent of government revenue and 95 percent of foreign-exchange income.

Rising crude prices are “a boon especially for Nigeria,” Kojo Amoo-Gottfried, a London-based analyst at FM Capital Partners, wrote in a note to clients today. “Oil appears to have reversed its recent negative trend and is now trading close to same levels at the start of the year.”

The naira gained for a fourth day, rising 0.2 percent to 158 a dollar in Lagos, the commercial capital.

The West African nation’s currency last week rallied for its best five-day performance in more than a year after the Central Bank of Nigeria sold Treasury bills and the largest amount of dollars in over a month at a foreign exchange auction.

“The local unit derived greater support from the CBN, which mopped up naira liquidity by selling T-bills and increasing its offering of U.S. dollars at its biweekly auctions,” Celeste Fauconnier and Nema Ramkhelawan-Bhana, Africa strategists at Rand Merchant Bank in Johannesburg, wrote in an e-mailed report today. “The currency pair should sustain levels below 162 as long as the naira shortage prevails.”

Currency Sale

Nigeria sold $147 million at a foreign-currency auction today, the least since May 7 and less than the $180 million offered, the Abuja-based central bank said in an e-mailed statement. The marginal rate, which is also used as the prevailing exchange rate, was 155.83, unchanged from the previous sale on Aug. 8.

Yields on the West African nation’s 16 percent domestic debt due 2019 fell one basis point, or 0.01 percentage point, to 16.51 percent, according to Aug. 10 prices on the Financial Markets Dealers Association website.

Ghana’s cedi gained 0.2 percent to 1.9528 a dollar in Accra, the capital.

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