Oil market fortunes shine on the performance of Nigeria’s Eurobonds

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A man holds Ghana's cedi notes in Accra July 3, 2007. Ghana's cedi currency was redenominated on Tuesday, shedding four zeros, in a move intended to make life easier for shoppers and business people fed up of carrying large bundles of cash that make them easy prey for thieves. REUTERS/Luc Gnago (GHANA) - RTR1RFOW

In the previous day, the overall sentiment in the market for Nigeria’s Eurobond was upbeat, as investors locked in funds across all maturities available. Notably, the yield on all sovereign Eurobonds declined, bringing average yield to 8.4%, an 18bps decline from the preceding day.

Also, the corporate segment recorded a similar performance, as average yield declined by 21bps d/d, t o11.1%.

Oil market fortunes shine on the performance of Nigeria’s Eurobonds - Brand Spur
REUTERS/Luc Gnago
(GHANA) – RTR1RFOW
Oil market fortunes shine on the performance of Nigeria’s Eurobonds - Brand Spur
Source: FMDQ, United Capital Research

By all indications, the bullish performance was driven by the positivity emanating from the crude oil market.

Notably, the price of Brent crude surged as high as 3.2% to $39.5/b during the day, on the back of a possible one-month extension of the OPEC+’s current production cut, at 9.7mb/d.

With crude oil being Nigeria’s main source of forex and export earnings, investors dived into the Eurobond market.

Looking ahead, we expect the fortunes of the oil market to continue to bolster interest in the Eurobond market, as economies are gradually reopening – increasing the demand for crude oil –, and major oil producers are more inclined to keep prices at a profitable level.

However, the risk remains a potential fallout of the proposed elongated crude oil supply cuts, which could rescind the increase in oil prices, and in turn, dampen sentiments for Nigeria’s Eurobond.

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United Capital Plc Research