Nigeria eurobonds rise amid chief’s suspension

Nigeria’s eurobonds denominated in dollars experienced a significant increase in value after the recent suspension of Godwin Emefiele, the governor of the Central Bank. Emefiele had overseen multiple exchange rates in an attempt to bolster the value of the naira, but these efforts proved ineffective. According to Reuters, the prices of the West African oil producer’s eurobonds rose by as much as 2.6 cents in the dollar on Monday, reaching their highest levels since late January. Although the prices moderated slightly, longer-dated maturities recorded the most substantial gains, with the 2049 maturity rising by 2.353 cents to 80.231, as per Tradeweb data.

Nigeria is grappling with a severe shortage of dollars, prompting many individuals to seek foreign currency on the black market, where the naira’s exchange rate is significantly lower than the official rate. Barclays economist Michael Kafe remarked in a client note that the recent changes signal a new era of focused and predictable monetary policy, as well as a shift towards non-interventionism in the foreign exchange regime. President Bola Tinubu, who was critical of Emefiele’s handling of the naira and monetary policy, has expressed his commitment to revitalize Nigeria’s struggling economy. His administration has already removed a fuel subsidy and pledged to streamline the multiple exchange rates.

Kafe further noted that the swift actions taken by the newly appointed president to address the country’s economic challenges, including the immediate removal of the fuel subsidy, indicate a determination to tackle difficult reforms early in his tenure. In light of Emefiele’s suspension, Folashodun Shonubi, a deputy governor, has assumed the role of acting head of the Central Bank. Emefiele, who is now in custody, is under investigation, as announced by the police on Saturday. Previously, in December, a court order had blocked his arrest on suspicion of “terrorism financing,” citing a lack of evidence. It remains uncertain whether the recent arrest is related to the same charge.