Aftermath of Trump’s threats: Nigerian assets tumble

Our Correspondent

Nigeria’s dollar bonds suffered the biggest losses in emerging markets on Monday following US President Donald Trump’s threat of military action in the country if its government doesn’t halt the killings of Christians by Islamist militants, Bloomberg reports.

Bloomberg said data it compiled shows that Nigerian dollar bonds fell across the maturity curve, comprising all 10 of the worst performers in emerging markets worldwide as of 10:45 a.m. in Lagos. The notes maturing in 2047 were down most, falling as much as 0.6 cents on the dollar to 88.26 cents before paring the decline.

Nigeria’s currency, the naira, also dropped, falling 1.2% to 1,442.80 against the dollar, the most on an intraday basis since June. That was also the biggest loss among emerging-market currencies on the day, it said.

The agency recalls that in a post Saturday on Truth Social, Trump said he’s instructing the Pentagon “to prepare for possible action” and threatened an immediate cutoff in aid to Nigeria, an OPEC member that’s Africa’s most populous country.

Nigerian President Bola Tinubu rejected Trump’s characterization of the country, saying he was disregarding “the consistent and sincere efforts of the government to safeguard freedom of religion and beliefs for all Nigerians.”

“We expected a negative knee-jerk reaction on the back of Trump’s comments, but we are comfortable with Nigeria’s creditworthiness and outlook,” said Anders Faergemann, portfolio manager at PineBridge Investments. “We expect markets will calm down.”

Investors had turned more positive on Nigeria since Tinubu’s election in 2023, after he took difficult steps to reform the economy that included removing a costly fuel subsidy and liberalizing the currency market.

The average spread on Nigeria’s sovereign dollar bonds over US Treasuries had plunged to about 400 basis points from nearly 1,000 basis points in 2023, a level that investors typically consider to mark debt distress. The Nigerian stock market, meanwhile, has also attracted more investor interest, gaining nearly 60% in dollar terms this year.

“The threat of US military action is an unexpected and seemingly disproportionate escalation,” said Adriaan du Toit, director of emerging-market credit research at AllianceBernstein. “It’s worth monitoring, but it doesn’t have sufficient substance at this point to dim the positive fundamental momentum.”

Trump said he was designating Nigeria a “Country of Particular Concern” because of worries about the safety of Christians. He also threatened to withdraw aid, which totaled about $1 billion in 2023, the last year for which full data is available.”

Source: Bloomberg