Smooth Nigeria polls could boost Eurobond, stocks

Mon Mar 28, 2011 3:57pm GMT

By Chijioke Ohuocha

LAGOS (Reuters) - Smooth elections in Nigeria could differentiate it from other political hotspots in the region and trigger renewed frontier investor interest in its Eurobond and equities.

Appetite for Nigeria's $500 million debut Eurobond has been lacklustre since it launched two months ago, while a rally in the stock market in the first few weeks of the year has petered out, partly due to nervousness ahead of the April elections.

Turmoil in North Africa and the Middle East, as well as a brewing conflict closer to home in Ivory Coast, has heightened awareness of political risk and dampened appetite for emerging markets in recent weeks. Nigeria has been no exception.

Its 10-year Eurobond, issued on January 28 at a 7 percent yield, has traded broadly flat at 6.9 percent despite being 2.5 times oversubscribed at launch and Nigeria's ability to service the debt, surprising some analysts.

April's presidential, parliamentary and state governorship elections are set to be fiercely contested.

Incumbent President Goodluck Jonathan is considered the front-runner but faces tough competition in the mostly-Muslim north from former military ruler Muhammadu Buhari, whose supporters are hoping they can force a run-off.

The ruling People's Democratic Party (PDP), which has dominated Nigerian politics since the end of military rule 12 years ago, is expected to see its strong parliamentary majority weaken and to lose control of some of the country's states.

"The Eurobond is likely to be more sensitive to perceptions of stability ... We expect trading to be fairly cautious in the run up to elections, with potential further upside if things go smoothly," said Business Monitor International's Alan Cameron, sub-Saharan African analyst.   Continued...

<p>An aerial view shows the central business district in Nigeria's commercial capital of Lagos, April 7, 2009. REUTERS/Akintunde Akinleye</p>
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