The continued downward spiral in oil prices portends grave consequences for numerous energy firms,financial Institutions and even local manufacturing companies in Nigeria, as they battle with dollar shortages to be used in repaying Euro bond debts issued during better times.
If the oil prices continue in this direction and the US Federal reserves increases her base rates ( an action we expect Janet Yallen to undertake today) the general borrowing cost across the globe will increase and especially emerging markets will feel the pain.Especially Nigerian Institutions may have to default on their obligations. Although we have seen higher Corporate bond yields in recent times showing investors request a premium to hold these bonds reflecting their perception of risk to these instruments, Nigeria's Richest man Aliko Dangote disagrees and says there will be no default because those looking for dollars to repay interest will get it from the Central Bank of Nigeria.
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