Nigerian Dollar Bond Suffers Week-long Losses Following EFCC’s Raid on Dangote’s Office

Nigeria’s dollar bonds maturing in 2025 have witnessed an alarming seven-day losing streak, marking their longest decline since September, according to Bloomberg.

The sharp drop in bond prices comes in the wake of a high-profile raid by the Economic and Financial Crimes Commission (EFCC) on the Lagos headquarters of Aliko Dangote, Africa’s richest person and head of the Dangote Group.

Investors, both local and international, are closely monitoring the unfolding drama, as the bonds hit their lowest levels since November 28, according to Bloomberg data. The EFCC raid, which took place on January 4, 2024, has sent shockwaves through Nigeria’s financial industry, raising concerns about the broader implications for the country’s economic stability.

Segun Ajayi-Kadir, the director-general of the Manufacturers Association of Nigeria, said the situation has triggered concerns within the industrial sector.

“Manufacturers are concerned that if this can happen to Dangote, it can happen to any one of them. They are worried,” he said.

The association criticized the aggressive tactics employed by the EFCC, highlighting the potential economic consequences and warning of a chilling impact on the nation’s economy.

“This news has gone around the world and many, including would-be investors, would be taken aback. This may not be the best way to show that Nigeria is committed to good corporate governance,” Ajayi-Kadir said in a separate statement.

The EFCC’s focus on the funding of Dangote’s $18.5 billion refinery, granted access to scarce dollars by the central bank, adds complexity to the unfolding narrative. The raid and subsequent investigation methods have unnerved business leaders and investors, prompting a reevaluation of their dealings with the central bank under Godwin Emefiele, the former central bank governor ousted in June.

Cheta Nwanze of SBM Intelligence suggested that the government’s actions are signaling a warning to the business community.

“It’s basically a signal to the business community that this government will go after anyone who they perceive may have the means to help fill the dollar gap in the government’s coffers,” he said.

Bloomberg’s analysis suggests subtle indications preceding the events, part of it, President Bola Tinubu’s absence during the inauguration of Dangote’s oil refinery in May 2023. Tinubu’s subsequent suspension of Emefiele and aggressive reforms in the foreign exchange regime further signaled a shift in economic policy, potentially straining relations with influential figures in the business community.

The Dangote Group vehemently denied any wrongdoing, describing the EFCC raid as an “unwarranted embarrassment.” The lack of public statements from the anti-graft commission has added to the uncertainty, leaving both domestic and international investors skeptical about Nigeria’s commitment to good corporate governance.

Tinubu’s critical stance on the central bank’s forex practices, coupled with Emefiele’s arrest and ongoing trial, portrays a government determined to overhaul economic policies. The scrutiny faced by Dangote is seen by some as part of a broader process to reform and bring transparency to Nigeria’s financial sector.

Despite the government’s intentions, investors remain unconvinced. Total capital inflows declined significantly, dropping 44% to $655 million in the third quarter of 2023 from $1.16 billion a year earlier, according to Bloomberg. The Manufacturers Association expressed concern over the appropriateness of the methods employed during the EFCC raid, questioning the need for an armed invasion at a well-structured company like Dangote Industries Ltd.

This fallout between Dangote and the EFCC has put the nation at an economic crossroads. Investors and industry leaders anxiously await the outcome of the investigation, hoping for a transparent and fair process that will reassure them of Nigeria’s commitment to good governance and economic stability.