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Bond Market News

Nigeria’s Debt Cost Exceeds Revenue as Oil Sales Slump

Nigeria’s oil revenues of 1.63bn Naira ($3.8bn) since the start of the year to April are 61% below budget forecasts for the period and lower than the 1.94tn Naira ($4.6bn) needed to service its outstanding debt. Despite oil prices soaring globally, the African sovereign has been unable to capitalise on it due to pipeline vandalism, theft and high costs of subsidizing imported gasoline. Consequently, the government has lowered its economic growth estimates from 4.2% to 3.5%. While Nigeria’s cost exceeds their revenue, Razia Khan, head of research for Africa and the Middle East at Standard Chartered Bank thinks that the nation’s credit worthiness will likely remain unchanged because its reserves can still “comfortably meet any external debt service falling due.” Nigeria is currently rated B2/B/B by the three major rating agencies.

Nigeria’s 8.25% 2051s are currently trading higher at 63.2 cents to the dollar, up by 0.33 points and yielding 13.24%.

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