Good Times Beckon for Nigeria Bonds, Not So Much for Stocks

LAGOS (Capital Markets in Africa) – A growing divergence in Nigeria’s bond and equity markets may continue, as a president who’s wary of free markets extends his term for another for years.

After Muhammadu Buhari won a resounding victory in his bid for re-election as Nigeria’s president, stocks slumped among the most in the world last week. Meanwhile, local bonds gave the biggest returns within EM, according to Bloomberg indexes.

What gives? For equity investors, another four years of Buhari means bad times for the economy. Yet for bond traders, the stability of the naira matters more. And they can be assured of this, given the pressure Buhari puts on the central bank to shore up the currency. And that means policy makers need to keep yields elevated. At an average yield of 14.4% they’re among the highest for major EMs. Such high rates are scarcely what the economy or stocks need, but that’s not the problem of bond investors.

Source: Bloomberg Business News