Morgan Stanley turns ‘bullish’ on Nigeria bonds after presidential poll

Morgan Stanley on Thursday declared they had become “bullish” on Nigeria’s government bonds, expecting that Bola Tinubu, who achieved 37% of the votes in the presidential elections, would move forward with essential fiscal and financial market improvements.

Neville Mandimika, from the Wall Street bank’s main Nigeria analyst team, wrote a note stating that there are potential positive triggers on the horizon.

These include phasing out of costly fuel subsidies, launching a much-anticipated oil refinery, as well as tackling multiple exchange rates issues.

According to Mandimika, their preference is to purchase Nigeria’s February 2032-maturing bond over Egypt’s 2029 bonds and that they have moved the sovereign from a neutral stance to a like stance.

However, there is still some uneasiness about the longer-term revenue trajectory in Nigeria as compared to its emerging market peers – with a federal tax revenue to GDP ratio of 10% (much lower than other similar countries).

The IMF estimated that 96.3% of Nigeria’s Federal Government revenues were used to pay interest in 2022 – further indicating how painful these costs can be.

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