The appetite for Nigeria’s bonds is undaunted by recent happening in the country with yields of Nigeria’s ten-year bond falling to 4.82 percent last Thursday, reports the Financial Times.
Analysts said that foreign investors appear to be sticking for the time being with Nigeria. The yield of the country’s 10-year bond fell on Thursday to 4.82 percent, down from 5.97 percent in late February, a sign that investors are not selling.
“The yields of our bonds are holding. The risk of Nigeria has been priced,” says Ngozi Okonjo-Iweala, coordinating minister for the economy and finance minister.
But the impact on foreign direct investment is less clear and some analysts are worried that foreign companies may delay their investment plans for Nigeria until the military response against Boko Haram has achieved some success.
According to the minister, the Nigerian economy has enough resilience to ride out the wave of Boko Haram terror attacks, in an attempt to persuade foreign investors to keep their holdings in local bonds and stocks.
Nigeria is Africa’s largest economy and a magnet for international investors, which have poured billions of dollars into factories, oil fields and its local securities market.
“We are sticking to our growth forecast of 6.75 percent (for 2014). It is realistic. Any losses in the North East (where Boko Haram is more active) will be made up by activity elsewhere,” Okonjo-Iweala told the Financial Times in an interview.
“The economy has enough resilience to ride this challenge”, she said.
The International Monetary Fund is even more upbeat than the government, forecasting economic growth this year at 7.3 percent, up from 6.4 percent in 2013.
Boko Haram has killed 2014nearly 200 people in a series of attacks last week, including a twin-bomb in a city in the centre of the country, shaking confidence in the country’s future. The Islamist group gained global notoriety after it kidnapped more than 250 schoolgirls a month ago in Chibok, Borno State.
The bomb campaign, and recent terrorist attacks in Abuja, the capital, and Kano, reasserted the al-Qaeda-linked group’s capacity to strike well beyond its heartland in the impoverished North Eastern states bordering Chad, Cameroon and Niger. But the attacks have so far not reached the country’s economic engine of Lagos, the burgeoning commercial capital of Nigeria.
Okonjo-Iweala used the annual meeting of the African Development Bank last week in Kigali, Rwanda, to woo foreign investors, promising to keep a tight leash on the budget in spite of extra military spending to fight the Islamist group.
“I reassured them that we will maintain tight monetary and fiscal policies,” she said, adding that Nigeria was rebuilding its fiscal buffers. The excess crude account, a saving system for oil revenues, has accumulated $3.6 billion, up from $2.1 billion in 2013.
Okonjo-Iweala said that extra military spending of $381 million will increase the fiscal deficit slightly to 2.0 percent of GDP in 2014, up from an initial forecast of 1.9 percent.
“The military will want more equipment, but let me be very clear: we have no intention to increase domestic borrowing for that,” she said, suggesting Nigeria would likely pay for any new military kit through export finance arranged by the weapons’ sellers.
The finance minister also ruled out a return to the sovereign bond market, after it raised $1 billion last year. Nigeria debuted in the bond market in 2011 with a $500 million note.
