Nigeria rewrites the rule book

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Nigeria rewrites the rule book

Nigeria is in an economic and political mess but by no means insolvent. Why then does it look likely to default on bond payments?

Most analysts agree that a Nigerian bond default is a question of when rather than if.


Certainly, the west African state's bonds are trading at distressed levels of more than 2,500 basis points over treasuries. But the major oil producer has never had any difficulty coming up with the cash for coupon payments. If Nigeria does default - and it could be some time this year - it will be because it gets no benefit from paying its debts, not because it's incapable of paying them. Nigeria would be the first country to default on its bonds because it wanted to and not because it had to.


       

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On the face of it, there are relatively few grounds for concern. Nigeria has long been in arrears to the Paris Club of bilateral creditors but its relations with the London Club of private-sector lenders have been much better.



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