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Nigeria’s international debt surged after the weekend ouster of the central bank governor, which will allow the nation’s new president to better pursue his promise of resetting monetary policy that’s been blamed for crippling Africa’s biggest economy.
Godwin Emefiele was suspended by President Bola Tinubu after the markets closed on Friday, and detained by Nigeria’s state security service a day later for what were termed “investigative reasons.” Folashodun Shonubi, a deputy governor in charge of operations at the bank, will take over in an acting capacity.
Nigeria’s international bonds jumped the most among emerging-market peers at the open yesterday, with its longest-dated dollar bonds rising to the highest since January. The notes maturing in 2051 rose nearly 3 cents on the dollar to 73,42, the biggest gain since April, as of 8:05am in London.
Analysts said the outcome of Emefiele’s removal should be that Nigerian bonds strengthen and benchmark interest rates may rise as the nation’s assets look more attractive to investors. The scrapping of a multiple exchange rate regime will likely lead to the devaluation of the naira.
“The market will receive the removal of Godwin as a positive development, as his unorthodox policies had become an impediment for Nigeria,” Ronak Gadhia, director of Sub-Saharan banks research at EFG Hermes, said by email. “His removal should be viewed as positive and could lead to increased risk appetite for Nigerian bonds and equities.”
“A more normalised and conventional” policy “should result in higher interest rates in the short term as the CBN attempts to rein in on inflation,” Gadhia added.
Emefiele’s policies — including propping up the naira, restricting foreign exchange for dozens of imports, and focusing on development finance — had long been criticised by investors, economists and institutions like the World Bank. — Bloomberg.
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