Nigeria’s eurobonds surge after Central Bank Governor suspension

Nigeria’s sovereign dollar-denominated bonds experienced a significant increase as international investors reacted positively to the suspension of Central Bank Governor Godwin Emefiele. His tenure saw multiple exchange rates that failed to maintain a strong naira. The country’s eurobonds prices surged, with many issues reaching their highest values since late January.

Longer-dated maturities, such as the 2049 maturity, witnessed the largest gains, according to Tradeweb data. Nigeria is currently grappling with severe dollar shortages, leading many individuals to turn to the black market for foreign currency, where the naira trades at a much lower rate compared to its official exchange rate.

Barclays economist Michael Kafe said in a note to clients on Monday that the suspension of the Central Bank chief signals “a new era of focused, predictable monetary policy and a shift towards non-interventionism in the foreign-exchange regime.” President Bola Tinubu had previously criticised Emefiele’s management of the naira and monetary policy during his inauguration two weeks ago.

Tinubu, who has pledged to revitalise Nigeria’s struggling economy, has also eliminated a fuel subsidy and vowed to consolidate the multiple exchange rates. Kafe wrote, “The haste with which the newly appointed president has begun to tackle the country’s economic challenges (e.g. the immediate removal of the fuel subsidy…) suggests that he is keen to pursue all the difficult reforms at the early stages of his term.”

Folashodun Shonubi, a deputy governor, has been appointed as the acting head of the Central Bank. The suspended governor is currently in custody and under investigation, according to police. In December, a court order prevented Emefiele’s arrest for alleged “terrorism financing” due to insufficient evidence. It is unclear if the recent arrest is related to the same charge.