JP Morgan delists Nigeria from emerging market over huge debts

JPMorgan has removed Nigeria from its list of emerging market sovereign recommendations over its fiscal woes.

The global financial institution said Nigeria has failed to take advantage of high oil prices.

It replaced Nigeria in the list with Serbia due to the country’s high reserves and a fiscally cautious government and also Uzbekistan due to its relatively low debt despite Russian exposure.

On Nigeria, the analysts said: “NNPC did not transfer any revenue to the government from January to March this year, due to petrol subsidies and low oil production, as it moved Nigeria’s debt out of the bank’s ‘overweight’ category.

“Nigeria’s fiscal woes amid a worsening global risk backdrop have raised market concerns despite a positive oil environment,” they said.

The comments on Nigeria are coming at a time the Federal government is planning another Eurobond sale of $950 million.

Nigeria successfully issued the continent’s first Eurobond in 2022, raising $1.25bn in March at the cost of 8.375 percent which many financial analysts considered as a premium price.

It is expected that the latest plan to tap the international debt market could even be more expensive.

Last week, the Federal government raised its benchmark overnight interest rate by half a percentage point, the biggest jump in 22 years, as it seeks to tame high inflation while its rate increases also buffet higher-yielding emerging markets.

JP Morgan analyst continues, “The external and fundamental backdrop has become increasingly difficult for EM sovereigns.”

“The COVID lockdown in China poses further downside risks.”

They noted that riskier sovereign yields were now 10.6%, the highest level since the first wave of the coronavirus pandemic in April 2020, reducing market access and increasing the risk of debt defaults.

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