Obinna Chima

with agency report

The yields on Nigerian treasury bonds yields are expected to fall at a primary auction next week, due to a lower supply.

The Debt Management Office (DMO) plans to sell N60 billion of 5, 10 and 20-year Treasury bonds next week, short of the usual N70 billion naira worth of bonds sold at the previous auction last month.

“The bond market has been active all week, with yields trending down to 13.60 percent levels as some investors taking position in the market ahead of next week’s auction after the debt office slashed amount on offer,” Reuters quoted one dealer to have said.

Traders said though some investors were taking profit in the market on Friday, but say this could be short-lived.

Yields on the benchmark maturing in 2024 traded at 13.77 percent yesterday compared with 14.06 percent last Thursday, 2022 traded at 13.70 percent against 14.11 percent, while the 2016 traded at 13.98 percent compared with 14.01 percent.

The Head of Research and Chief Economist for Africa at Standard Chartered Bank, Razia Khan, during the week predicted that Nigeria’s weakening fiscal buffers as a result of the sustained low oil price may result in a current account deficit in the country’s balance of payments this year.

Khan who said this during a session with select journalists in Lagos also forecast that the country may also raise capital from the international debt market by the second half of the year to meet some of its obligations.

The economic analysts stressed that policy makers in the country failed to effectively utilise the opportunity created by the high crude oil prices in the past years, saying that it would be difficult for the country to rebuild fiscal buffers in a low oil price environment.

Khan however predicted that crude oil price would average at $76 per barrel by the second half of the year.

“We see oil prices averaging $76 per barrel over the course of this year and we think that this means that by the second half of the year, there is a likely hold that oil prices would be $80 to $90 per barrel.

“So, for countries like Nigeria, the important take away is that we have moved away from that world of triple digit oil prices and what we would see going forward, is more like a double digits oil prices scenario.

“We know about the extent to which Nigeria failed to capitalise properly in the boom years in terms of oil production when the oil prices were high. So, it is not going to be that easy necessarily given the demands from the fiscal side, to rebuild fiscal buffers in a low oil price environment,” she explained.

While calling for the removal of fuel subsidy, Khan said: “It takes away resources from the poor and rewards those who consume more fuel, which are mostly wealthy Nigerians. So, just from a perspective of having a tax regime that isn’t regressive, there are very serious reasons for the eradication of that subsidy.”

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