Nigeria may have lost its prime position in bond market to Angola, following the latter's plans for an international bond sale by the end of June, according to report from analysts at Renaissance Capital (Rencap). However, the exercise will be preceded by credit rating to enhance its sales at the international market.
In fact, Nigeria started the plans for getting the sovereign bond rating before Angola, which rivals her as Africa's biggest oil producer, but had to be postponed due to global financial crisis. The implication is that Angola hopes to get a credit rating next month and launch its first international bond sale by the end of June, according to the analysts.
Top rating agencies Moody's Investors Service, Fitch Ratings and Standard and Poor's were said to have been in the Angolan capital, Luanda, in recent weeks to meet with government officials and assess the nation's economy with the hope that it could get rating higher than Nigeria, which currently has a B+ sovereign rating from Standard & Poor's.
The current political crisis coupled with continued dependence on oil as the only major source of foreign exchange earner may work against Nigeria, as according to the report, "Angola claims it is more politically stable than Nigeria and that it is working hard to diversify its economy away from oil".
Nigeria last year suspended plans to issue its first bonds of $500 million because of the global economic crisis. Ghana was the first sub-Saharan African country apart from South Africa to sell eurobonds, raising $750 million in 2007. South Africa raised $2 billion in a sale of 10-year bonds in May last year.
While Angola has been the top Africa oil producer for several months in 2009 and macroeconomic fundamentals are expected to improve considerably in 2010 on the back of higher annual oil prices and production, the analysts were of the opinion that the forthcoming credit rating will probably be capped at B+ in an optimistic scenario, while Nigeria's rating by Standard and Poor's [BB- by Fitch]) could even come down to B, considering the poor governance, elevated income inequality and the lack of economic diversification. According to the analysts, the bond issue is likely to be much smaller than the $4 billion issue previously expected now that oil prices and the Angolan economy have rebounded.
The analysts further observed that countries with credit ratings usually get better deals on their bond sales than nations without a rating, adding that the higher the rating, the lower the interest rate paid on the bonds. A credit rating estimates the credit worthiness of an individual, corporation, or even a country. It is an evaluation made by credit bureaus of a borrower's overall credit history. It is also known as an evaluation of a potential borrower's ability to repay debt, prepared by a credit bureau at the request of the lender.
Angola seeks to surpass Nigeria in international bond market (http://www.businessdayonline.com/index.php?option=com_content&view=article&id=9392:angola-seeks-to-surpass-nigeria-in-international-bond-market&catid=85:national&Itemid=340)
latest news, breaking news, business, finance analysis, comments and views from Nigeria :: Businessday