Nigeria’s dollar bonds recorded the steepest losses in emerging markets on Monday after former US President Donald Trump threatened possible military action against the country over alleged killings of Christians by Islamist militants.
According to Bloomberg data as of 10:45 a.m. in Lagos, Nigerian sovereign bonds fell sharply across maturities, occupying all ten spots among the worst performers in emerging markets. The 2047-maturity notes declined the most, shedding as much as 0.6 cents on the dollar to 88.26 cents before trimming the losses later in the day.
Trump, in a post on his social media platform Truth Social on Saturday, said he had instructed the Pentagon “to prepare for possible action” and warned of an immediate suspension of US aid to Nigeria. The oil-producing West African nation, which is Africa’s most populous country, received about $1 billion in US assistance in 2023.
Reacting to the statement, Nigerian President Bola Tinubu dismissed Trump’s claims, saying they ignored “the consistent and sincere efforts of the government to safeguard freedom of religion and beliefs for all Nigerians.”
The naira also weakened on the day, sliding 1.2 per cent to 1,442.80 per dollar in its biggest intraday drop since June, making it the worst-performing currency among emerging markets on Monday.
Market analysts said the selloff was driven by investor reaction to Trump’s comments but maintained confidence in Nigeria’s broader economic outlook.
“We expected a negative knee-jerk reaction on the back of Trump’s comments, but we are comfortable with Nigeria’s creditworthiness and outlook,” said Anders Faergemann, portfolio manager at PineBridge Investments. “We expect markets will calm down.”
Nigeria’s economic reforms since Tinubu took office in 2023—such as the removal of the fuel subsidy and the liberalisation of the foreign-exchange market—have improved investor sentiment. The average spread on Nigeria’s sovereign dollar bonds over US Treasuries has narrowed to about 400 basis points, down from nearly 1,000 basis points in 2023, a level typically viewed as indicating debt distress.
Similarly, the Nigerian stock market has rallied strongly, gaining nearly 60 per cent in dollar terms this year amid increased investor confidence.
“The threat of US military action is an unexpected and seemingly disproportionate escalation,” said Adriaan du Toit, director of emerging-market credit research at AllianceBernstein. “It’s worth monitoring, but it doesn’t have sufficient substance at this point to dim the positive fundamental momentum.”
Trump also announced plans to designate Nigeria as a “Country of Particular Concern” over the alleged persecution of Christians.
Nigeria, home to about 230 million people evenly split between Muslims and Christians, has battled Islamist insurgency in its northeast for more than a decade. The conflict, which has claimed tens of thousands of lives, drew global attention in 2014 following the abduction of more than 200 schoolgirls in Chibok.
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