Nigeria may now pay $1.5m more in interest payments for outstanding foreign loans annually, after Donald Trump emerged as the United States of America’s President-Elect on November 9.
In reaction to Trump’s victory, the interest rate on US 10-year bonds rose by 15 basis points to 1.97 percent from 1.82 percent yesterday, as markets expect Trump to run larger budget deficits.
As a result, “Nigeria will be paying at least $1.5 mn more a year in interest payments,” said Charles Robertson, the chief economist at Renaissance Capital in response to questions.
“But beyond that, global markets have been pretty calm. Oil, the dollar and equities have not reacted dramatically,” Robertson added.
Nigeria paid a total of $91.2 mn to bondholders in 2015, servicing its three outstanding Eurobonds, $500 mn each, maturing in 2018, 2021 and 2023.
The rise in bond yields will take servicing costs to $92.7 mn, an increase of 1.6 percent.
It is however unclear yet how the market reaction may shape Nigeria’s quest to borrow more externally to plug its budget deficit.
Global markets have started reacting in early hours with sell offs of dollar assets. While this may bring some respite to an already weak Naira, analysts believe the impact might be short-lived as markets readjust while awaiting clarity on Trump’s policies.
“In the interim, we do not envisage that the weakening of the Dollar will be substantial enough to significantly strengthen the Naira and incite major interests in Naira assets,” said Mark Bohlund, Middle East Economist at Bloomberg Intelligence told BusinessDay in response to emailed questions.
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