Morgan Stanley turns 'bullish' on Nigerian bonds after presidential poll

Morgan Stanley said on Thursday they had turned "bullish" on Nigerian government bonds, expecting Bola Tinubu, who won 37% of the vote in the presidential elections, to go ahead with essential tax and financial market improvements.

Neville Mandimika of the Wall Street bank's leading Nigerian analyst team wrote a note indicating that there are potential positive triggers on the horizon.

These include the phasing out of costly fuel subsidies, the launch of a much-anticipated oil refinery, as well as the resolution of several exchange rate issues.

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According to Mandimika, their preference is to buy the Nigerian bond maturing in February 2032 rather than the Egyptian bonds of 2029 and that they have moved the sovereign from a neutral position to a similar position.

However, Nigeria's longer-term revenue trajectory remains uncertain compared to its emerging market counterparts, with a federal tax revenue-to-GDP ratio of 10% (much lower than in other similar countries).

The IMF estimated that 96.3% of Nigeria's federal government revenue was used to pay interest in 2022, indicating just how painful these costs can be.

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