Nigeria’s sovereign bonds fell on Monday following U.S. President Donald Trump’s threat of possible military action if the country fails to protect Christians.
Trump, in a statement on Sunday, warned that the U.S. military could deploy troops to Nigeria or conduct airstrikes to stop what he described as the killing of large numbers of Christians.
Longer-term bonds were the most affected, with the 2051 issue dropping about 0.5 cents before recovering slightly to trade just under 92 cents on the dollar — a sharp contrast to the steady performance of most emerging market bonds.
Responding to Trump’s remarks, the Federal Government said it would welcome U.S. assistance in combating Islamist insurgents, provided Nigeria’s sovereignty and territorial integrity are respected.
Data from the Armed Conflict Location and Event Data Project shows that violence from Islamist insurgents in the Northeast, bandit attacks in the Northwest, and clashes between farmers and herders in the Middle Belt claimed around 3,570 civilian lives last year.
Despite Trump’s threat, investor sentiment remained largely stable. According to a Reuters report quoting the Head of Africa Strategy at Standard Chartered in London, “The dip seems contained and has partly reversed since.”
Foreign investors have continued to find Nigeria attractive this year, thanks to President Bola Tinubu’s economic reforms, including the removal of fuel subsidies and the devaluation of the naira.
Tellimer data shows Nigeria’s equities have risen by about 65% year-to-date in total U.S. dollar returns — the second-best performer in Africa after Ghana.
The country’s narrowing bond spreads have also raised expectations of multi-billion-dollar bond sales this year.
“My sense is that this will not become a major concern for the market,” said Aberdeen fund manager Kevin Daly, adding that Nigerian officials are expected to engage U.S. counterparts in discussions.
For now, the regions at risk are far from the country’s oil-producing south and commercial capital, Lagos.
“U.S. military strikes, which still look very unlikely, on the northern or central-north regions of Nigeria are unlikely to have much economic impact because of the lack of commercial activity and the existing disruption in these regions,” noted Tellimer’s Hasnain Malik. He added that Trump’s remarks were “a red herring for the investment case,” which should remain focused on economic policy reforms and strong valuations.