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FG Bonds Outperform Emerging Market Peers



Nigeria’s bond market has emerged the best performing in the emerging markets since the beginning of the year, outperforming China, Egypt, Brazil and South Africa.

Bloomberg Barclays Global EM Local Currency Index, which measures performance in 25 countries including Argentina and Turkey, shows that the naira bonds issued by the Nigerian government have returned 8.4 per cent in dollar terms this year.

According to the Bloomberg Barclays Global EM Local Currency Index, the Nigerian bond market was the only local-currency debt that did not make losses in the past two months.

Franklin Templeton Investments and BlackRock Inc. are among global money managers that are bullish on Nigerian securities, enticed by average yields of 13.4 percent, which, while down from almost 17 percent in August, are still among the highest in the world.

They are also confident that Nigeria will be able to keep the naira stable, thanks in part to oil prices having climbed around 60 percent in the past year. The naira has remained stable since a devaluation last year, and held its own as other emerging currencies began to tumble in April.

Investors looking for a haven amid the rout in emerging markets over the past two months are being encouraged to look more into the Nigeria’s domestic debt.

Meanwhile, financial markets have offered a fairly muted response to the historical Singapore summit, despite President Donald Trump describing it as being “fantastic” and “better than anyone could imagine”.

Global sentiment was initially elevated after the US President and North Korean leader Kim Jong-un signed a denuclearisation agreement which eased geopolitical tensions.

FXTM analyst, Lukman Otunuga, noted that the lack of insight offered on the steps taken by both sides to reach this monumental goal left investors somewhat cautious.

“There is a suspicion that the muted reaction following the Trump – Kim summit could be based on investors guarding themselves against the unpredictability of the Trump administration. Markets seem to be taking Trump’s words with a pinch of salt, especially when considering how he sowed chaos over the weekend by pulling out of a joint statement with the G7 allies.

“In the meantime, there may be a wait-and-see approach across financial markets until fresh details are provided by the United States or North Korea regarding the next key steps towards denuclearisation,” he said.


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