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Demand for Nigerian Debt Could Rise on Political Stability, Citigroup Says

Demand for debt from Nigeria, which has outperformed an average of emerging-market notes, will rise as political stability improves following April’s elections, said Richard Cookson, global chief investment officer for Citi Private Bank, a unit of Citigroup Inc.

Nigeria raised $500 million from its debut sale of Eurobonds on Jan. 21, with orders equaling more than two times the amount of debt sold. Citibank acted as joint bookrunner on the bond offer.

The 6.75 percent debt due 2021 has returned 6.2 percent since being issued, compared with a 5.2 percent 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 in Lagos. “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.”

Nigeria, is rated B+ by Standard and Poor’s, four levels below investment grade, and a step higher at BB- by Fitch Ratings. Ghana, ranked one level lower at S&P, has a yield of 6.15 percent on its dollar bonds due in 2017. Bonds due in 2016 from Lebanon, also rated B, yield 5.38 percent.

Angola’s long-term foreign-currency rating was raised one step to BB- by Fitch Ratings, one step above Greece’s assessment, as higher oil prices boost state revenue and debt arrears decline.

Citi Private Bank’s portfolio is currently “underweight” on emerging equities, with more exposure to fixed income, according to Cookson. “I am still comfortable that fixed income will outperform equities,” he said.


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