Nigeria Eurobond Yields Slip After S&P Rating; Naira Unchanged

Yields on Nigeria’s $500 million of Eurobonds fell after Standard & Poor’s raised its rating on the West African country by one grade. The naira was unchanged in Lagos trading.

Borrowing costs on the 6.75 percent dollar debt maturing in 2021 slipped one basis point, or 0.01 percentage point, to 4.42 percent at 10:35 a.m. in London trading, the lowest level since their January 2011 issue. Yields on the Eurobonds of Africa’s biggest oil producer have tumbled 169 basis points this year. The naira was steady at 157.3 a dollar on the interbank market in Lagos, the commercial capital.

S&P increased Nigeria’s credit rating to BB-, three levels below investment grade, yesterday as sub-Saharan Africa’s second biggest economy increased foreign-currency reserves because of high oil prices and due to the government’s decision to cut fuel subsidies in January, raise electricity tariffs and privatize the state-run power industry. Moody’s Investors Service separately assigned Nigeria a Ba3 rating yesterday, the equivalent of its grades at S&P and Fitch.

“S&P cited the country’s strong external reserves which have held firmly above the $40 billion threshold in recent months as underpinning its improved outlook on the country,” Oludare Fajimolu and Gloria Obayagbo, Lagos-based analysts at CSL Stockbrokers Ltd., wrote in an e-mailed note today. “The rating agency also hinted at improved optimism about progress with on-going financial and power sector reform programs.”

Yields on Nigeria’s 16.39 percent local currency bonds due 2022 declined one basis point to 12.77 percent, according to yesterday’s prices compiled on the website of the Financial Markets Dealers Association.

“Nigeria’s rating upgrade holds the potential to improve the global attractiveness of the local debt market, in our view,” the CSL Stockbrokers analysts said.

Ghana’s cedi rose less than 0.1 percent to 1.8806 a dollar in Accra, the capital.

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