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Naira Snaps 2-Day Drop as Barclays Adds Nigeria Bonds to Index

Nigeria’s naira snapped two days of declines against the dollar as Barclays Plc said it will add the nation’s debt to its emerging-market local-currency government bond index from March 2013.

The currency of Africa’s biggest oil producer gained 0.2 percent to 157.025 a dollar by 2:30 p.m. in Lagos, the commercial capital. The naira has increased 3.4 percent this year, the second-best performer in Africa, according to data compiled by Bloomberg.

Barclays follows JPMorgan Chase & Co., which added the West African nation’s bonds to its benchmark indexes last month. Barclays made the decision after reviewing changes in the market and polling investors on governance and market accessibility. The London-based bank’s EM Local-Currency Index includes securities from 20 eligible countries with a market value of $1.62 trillion.

“It is a very positive development and the Nigerian economy is getting more credibility,” Jide Solanke, an analyst at First Securities Discount House Ltd., said by phone from Lagos today. “Everybody knows they have strict criteria for the inclusion to any government bond index.”

Borrowing costs for Nigeria’s federal government dropped since JPMorgan’s announcement in August to add the bonds to its GBI-EM index series. The yield on the 16.39 percent naira debt due January 2022 fell 324 basis points to 12.89 percent since the start of August, according to yesterday’s prices compiled by the Lagos-based Financial Markets Dealers Association.


The yield on the nation’s $500 million of Eurobonds due January 2021 fell for a fifth day, sliding three basis points to 4.43 percent today.

The central bank, led by Governor Lamido Sanusi, has left the benchmark interest rate unchanged at a record 12 percent this year, increased lenders’ reserve requirements and limited access to money auctions to stop dealers from buying foreign currency using naira purchased from the central bank at a discount.

The regulator, based in the capital Abuja, yesterday sold $29.88 million at the first of its regular twice-weekly foreign-currency auctions, the lowest amount in more than three years.

The naira strengthened 0.3 percent last week “partly due to lower corporate demand to pay for imports,” Ecobank Transnational Inc. strategists, led by Paul-Harry Aithnard in Paris, wrote in an e-mailed note to clients today.

Oil accounts for 95 percent of Nigeria’s foreign-exchange income and 80 percent of government revenue. Corruption is rampant with Nigeria placed 143rd out of 182 countries in a Corruption Perceptions Index released in December by Transparency International, a Berlin-based anti-graft watchdog.

Nigeria’s long-term foreign-currency debt is rated B+ by Standard & Poor’s, or four levels below investment grade. It is also grappling with an Islamist militant group called Boko Haram in the north of the country, which has claimed responsibility for hundreds of attacks over the past two years on churches, government buildings and the killing of police,

Ghana’s cedi was little changed at 1.8812 a dollar in Accra, the capital.

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