According to Bloomberg, Nigerian bonds posted among of the biggest gains among emerging markets on Monday.
On a Bloomberg index of 71 emerging and frontier nations, five Nigerian dollar bonds rated among the ten highest performers on Monday, according to the news agency.
Monday was the day when the country’s sovereign risk premium decreased the most this year, according to data from JPMorgan Chase & Co.
The equity benchmark in Lagos reached its highest level in eight months.
Investors expected Bola Tinubu, candidate of the All Progressives Congress (APC), who has acquired an early lead in the presidential election tally, to execute much-needed budgetary changes, which led to this event.
Simon Quijano-Evans, chief economist at Gemcorp Capital Management, was quoted as saying, “Markets appear to be increasingly pricing in a Tinubu victory, given predictions that he may push through changes faster than others.”
“Yet, it is unlikely that this will be the case if the election winner is unable to implement visible reforms and personnel changes swiftly.”
Evans also suggested that bargain hunters may have contributed to some of the gains when Nigeria’s bonds plummeted prior to the elections.
According to Bloomberg, the price of Nigerian bonds maturing in 2047 increased by 1.8 cents to 68.8 cents per dollar, reducing their yield by 33 basis points to 11.5 percent.
Meanwhile, the prices of securities maturing in 2029, 2030, 2032, and 2033 all increased by more than 2%.
The NGX 50 Index reached its highest level since June 2022 for the fourth consecutive day, with Stanbic IBTC Holdings Plc accounting for more than half of the gains.
In the meantime, the JPMorgan gauge of sovereign-risk premium decreased 42 basis points to 723, or 104 basis points in the preceding three days.
It was reported that the gauge hovered above 1,000 basis points until November 3, the generally regarded threshold for a debt-stricken nation.
Patrick Curran, a senior economist at Tellimer Ltd, stated, “Tinubu, who we view as the least market-friendly of the three major candidates, is now in the lead, but it’s still early, and the good reaction in Nigerian credit could imply that markets believe Obi has a fighting chance.”
No matter who wins the election, there will likely be a marginal improvement in macroeconomic policy.