The world’s biggest fund manager is bullish on Nigerian bonds

A combination of high bond yields and a stable foreign exchange rate, has lured foreign investors back into the country. Sergio Trigo Paz a representative for Blackrock, the world’s largest asset manager said the company was currently looking at buying bonds in emerging markets such as Nigeria, Russia Columbia and Kazakhstan.

We are moving into some countries even deeper because we feel that the macro environment is much more stable than it was and likely to improve going forward,”

Why are yields on Nigerian bonds high ?

The yield of a bond is the return an investor gets from buying it. The nominal yield of a bond is the interest rate paid on it annually, while the current yield is the annual earnings of a bond divided by its current selling price.

Nigeria has embarked on a debt drive due to a fall in government revenue. Government derives a huge proportion of its earnings from crude oil income. A fall in oil prices and production volumes led to the government struggling to meet its obligations. A combination of high inflation rates and the need to attract investors has led to the bonds being sold at a high yield.

Foreign investors have piled into the bonds because the yields offered are almost twice the returns they would get from bonds issued by other countries. 10 year bond yields for the United States currently go for 2.34%. Interest rate on Nigerian bonds currently average 17%. Foreign exchange liquidity has since improved due to a rebound in crude oil prices and production volumes, enabling ease and entry for foreign investors.

Black rock was founded in 1988, and is the world’s largest fund manager with an estimated $7 trillion in assets. The company made $10.95 billion in revenues last year, and has operations in over 100 countries.