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Citigroup predicts strong demand for Nigeria’s Eurobond

By Babajide Komolafe, with agency report

Citigroup has pre-dicted rising de-mand for Nigeria’s Eurobonds in the international invement market.

Meanwhile, interbank lending rates rose by 65 basis points on the average in response to the 50 basis points increase in the Monetary Policy Rate (MPR), while the Naira depreciated by 50 kobo in the interbank segment.

Global Chief Investment Officer for Citi Private Bank, a unit of Citigroup Inc., Richard Cookson, made this prediction, saying demand for debt from Nigeria, which has outperformed an average of emerging-market notes, will rise as political stability improves following April’s elections.

Nigeria raised $500 million from its debut sale of Eurobonds on Jan. 21, with 100 per cent oversubscription.

Citibank acted as joint bookrunner on the bond offer.

The 6.75 per cent debt due 2021 has returned 6.2 per cent since being issued, compared with a 5.2 per cent average return for emerging-market notes, according to JP Morgan Chase & Co. emerging-market indexes.

“Given the demand for the country’s bond offer, and given the deteriorating quality of debt in the rest of the world, there should be more demand for the country’s debt,” Cookson said in an interview on May 23 in Lagos, Nigeria’s commercial capital.

“The political system is getting better and if all continues to go according to expectations, the overall credit rating of the country is likely to go up, not down”

In the Nigerian interbank money market, lending rates rose by 65 basis points on the average steeply in response to the measures to further tighten money supply announced by the Central Bank of Nigeria (CBN).

Data from the Financial Market Dealers Association (FMDA) show that interest rate for the secured Open Buy Back (OBB) lending rose to 9.92 per cent from 9.21 per cent on Tuesday.

Interest rate for Call lending rose to 10.71 per cent from 9.96 per cent while 7-Days lending rose to 11.25 per cent from 10.50.

Interest rates on 30 Days lending also rose to12.25 per cent from 11.79 per cent.

At the foreign exchange market, the Naira depreciated by 50 kobo against the dollar as the interbank exchange rate rose to N157.5 from N157 per dollar.

FMDA market Analysis, Kunle Ezun, said that the rise in interbank lending rate was due to the increase in MPR to 8.0 per cent.

“With the Standing Lending Facility of the CBN now at 10 per cent, all interbank rates will definitely rise above 10 per cent”, he said.


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