Diamond Bank Plc, a Nigerian lender, put plans to raise debt capital on hold amid concern that a reduction in Federal Reserve stimulus, which drove cash into emerging markets, may cause price volatility.
While the U.S. central bank kept its $85 billion in monthly debt purchases unchanged in October, there’s speculation of a reduction in asset buying in the first quarter of 2014, Chief Executive Officer Alex Otti said during a conference call in Lagos, the commercial capital.
Nigerian lenders are seeking dollars to help finance oil, power and infrastructure projects in Africa’s top crude producer. Diamond Bank, with shares that jumped 41 percent on the Nigerian Stock Exchange this year, said on May 30 it was considering a sale of $550 million in Eurobonds to boost operations.
Concern about the effect of Fed tapering came “towards the conclusion of our road show,” Otti said. “We’re monitoring the situation and considering other capital-raising options.”
Emerging-market bonds and currencies fell earlier this year as Fed officials signaled they may soon begin cutting the asset purchases. Yields on African dollar-denominated debt have climbed 134 basis points this year, compared with an average 99 basis-point advance in emerging-market bonds, according to JPMorgan Chase & Co. indexes.
Yields on Nigeria’s sovereign dollar debt due July 2023 gained a fourth day, adding four basis points to 5.77 percent by 5:02 p.m. in Lagos, almost a three-week high. Diamond Bank’s stock rallied 1.3 percent by the close in the city to 6.95 naira, the highest since May 30.