S&P: Nigeria buyback a plus

Standard & Poor's said that the latest buyback of obligations announced by the Federal Republic of Nigeria (foreign currency BB-/stable/B, local currency BB/stable/B) strengthens the platform for future improvements in the ratings on the sovereign.

The government recently announced a tender for the outstanding oil warrants, continuing its policy of settling existing external liabilities on the best terms possible, S&P said, noting that this would be the third such transaction undertaken in little more than one year, following the Paris Club deal and the buyback of $1.45 billion 2020 Brady Par bonds in 2006.

The government announced the buyback as part of its strategy to exit all remaining London Club obligations, which in addition to the oil warrants, include $581 million of outstanding promissory notes, the agency said.

According to S&P, the impact on Nigeria's already robust net external asset position is expected to be minimal. Settling the outstanding oil warrants reduces the future liabilities of the Nigerian government, but the cost of the buyback will be financed using existing reserves.

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