Nigeria’s sovereign bonds slipped on Monday after U.S. President Donald Trump threatened military action in the country if it did not take action to protect Christians.
Trump said on Sunday the U.S. military could deploy troops to Nigeria or carry out airstrikes to stop what he called the killing of large numbers of Christians in the country.
Longer-dated bonds fell the most, with the 2051 issue falling roughly 0.5 cents before retracing some of the losses to bid at just under 92 cents on the dollar, in contrast with flat trading for most emerging market bonds.
While reacting to Trump’s threat, the Federal Government said it would welcome U.S. help in fighting Islamist insurgents as long as its territorial integrity was respected.
Attacks from Islamist insurgencies in the Northeast, bandits in the Northwest, and bloody clashes between farmers and herdsmen in the Middle Belt killed some 3,570 civilians last year, according to the Armed Conflict Location and Event Data Project.
Investors were largely unfazed by the threat.
Referring to Eurobond prices, a Reuters report quoted the Head of Africa Strategy at Standard Chartered in London as saying that “The dip seems contained and has partly reversed since”.
Foreign investors have largely viewed Nigeria as an attractive destination for their cash this year, bolstered by economic reforms from President Bola Tinubu, including scrapping costly fuel subsidies and allowing the naira currency to devalue.
Nigeria’s equities are up around 65% year-to-date in total U.S. dollar return terms, according to Tellimer, making them the best performer in African emerging markets behind Ghana.
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The country’s bond spreads have also narrowed enough that it has been eyeing billions in bond sales this year.
“My sense is that this will not become a major concern for the market,” said Aberdeen fund manager Kevin Daly, citing expectations that Nigerian officials would discuss the situation with their U.S. counterparts.
And for now, the areas of concern are far from the oil-producing southern part of the country and the commercial capital, Lagos.
“U.S. military strikes, which still look very unlikely, on the northern or central-north regions of Nigeria are unlikely to have much economic impact because of the lack of commercial activity and the existing disruption in these regions,” said Tellimer’s Hasnain Malik, adding that Trump’s threats were, for now, “a red herring for the investment case”, which should focus on economic policy reforms and good valuations.
