‘Panic’ Selling on Oil Plunge Drives Nigerian Bond Yields Higher
‘Panic’ Selling on Oil Plunge Drives Nigerian Bond Yields Higher
Nigeria’s Eurobonds due 2047 dropped for the sixth straight day on Wednesday as investors dumped the notes over fears of a naira devaluation after global oil prices plunged this week.
Yields on the dollar securities jumped 28 basis points to 10.4% with currency speculators now betting that the central bank of Africa’s top oil producer will be forced to allow the naira to weaken.
Monetary authorities will protect the economy from the negative fall out of the sudden drop in oil prices, central bank Governor Godwin Emefiele said at a conference in the capital, Abuja, on Wednesday.
“We will not hesitate to deploy additional measures to shield the Nigerian economy from headwinds,” Emefiele said.
Foreign-exchange operators said a decline in the price of crude has increased demand for dollars as traders and businesses worried that a weaker naira will erode profits.
‘Unhealthy’ Behavior
The fall in oil markets is “a cause for panic in the foreign exchange market,” said Ainu Gwadabe, president of Bureau de Change Operators of Nigeria in Lagos, the nation’s commercial hub. “The situation has created unhealthy economic behavior like hoarding and speculation.”
A plunge in the price of crude oil is putting pressure on President Muhammadu Buhari’s government to devalue the naira as the decline in export revenue puts pressure on external reserves, hampering the ability of the central bank to continue to support the local currency in the import dependent nation. The West African nation depends on crude for 90% of its export earnings.
The naira was quoted at 367.53 per dollar as at 1.32 p.m. local time in the inter bank market, the weakest level since at least 1994 when Bloomberg started compiling the data.
Nigeria’s fiscal and monetary authorities said they would announce measures in coming days to deal with the economic fallout from the coronavirus outbreak.
To contact the reporter on this story: Emele Onu in Lagos at eonu1@bloomberg.net
To contact the editors responsible for this story: Anthony Osae-Brown at aosaebrown2@bloomberg.net, Chris Kay
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