Nigeria leads emerging-market bond rally as oil prices rise on Iran tensions
Nigeria’s dollar bonds led a rally across emerging-market debt early this week, as a rise in Brent crude prices boosted sentiment toward oil-exporting nations. The gains came amid escalating geopolitical tensions, with the US increasing pressure on Iran, adding a risk premium to global oil prices.
Nigeria’s sovereign dollar bonds were among the top performers globally, reflecting the country’s sensitivity to higher crude prices. Notes maturing in 2033 climbed 0.76 cents on the dollar to 100.66 cents by 3:06 p.m. London time, while longer-dated bonds also posted solid gains. The rally underscored renewed investor appetite for Nigerian fixed income as oil prices firmed.
Across emerging markets, the 10 best-performing sovereign dollar bonds on the day all came from Africa, with Nigeria and Angola two of the continent’s largest oil producers at the forefront. Zambia’s dollar bonds maturing in 2053 were also among the gainers.
Smail Ait-Mahrez, a Dubai-based capital markets professional, told Bloomberg that the rising geopolitical risks linked to Iran have reintroduced a risk premium into oil markets, benefiting exporters such as Nigeria. Higher crude prices help ease fiscal pressures, improving the outlook for oil-dependent economies and supporting demand for their debt.
“Higher crude prices ease fiscal pressure and are driving a tactical bid in names like Nigeria and Angola, with fixed income the natural entry point,” Mahrez said.
The rebound follows weakness last week, when US signals of potential moves to control Venezuela’s oil supply sparked broader losses across African credit markets. Prices have since recovered as oil markets refocused on Middle East risks.
Brent crude rose to around $65 a barrel on Tuesday after the US threatened tariffs on countries doing business with Iran. Iran, a major oil producer, has faced weeks of protests, which Tehran claims it has brought under control.
Despite the recent rally, some analysts remain cautious about the durability of higher oil prices. Guy Miller, chief market strategist at Zurich Insurance, said Brent crude is likely to remain fundamentally subdued over the year.
“We may have a bounce, but I don’t think it will be lasting,” Miller said. While lower oil prices may ultimately support global growth and benefit oil importers, he noted that the environment could remain challenging for emerging-market oil exporters such as Nigeria.
