(Bloomberg) -- Nigeria’s dollar bonds and equities rallied after President Bola Tinubu said he’ll end the nation’s $10 billion fuel-subsidy program and announced plans to adopt an uniform exchange rate.

Debt due in 2047 jumped 1.6 cents on the dollar to 66.23 by 4.50 p.m. in London, heading for the biggest advance in a month. Bonds due in 2049 gained 1.7 cents and those maturing in 2051 advanced 1.9 cents. The NGX 50 Index, which comprises of the nation’s biggest companies, surged 6.7% in Lagos, the most since November 2020. 

The money saved from scrapping gasoline subsidies will be used to fund education and health projects, the new president said in his inaugural speech. The proposal to discontinue a multiple-currency regime that created a 60% spread between a partially controlled official exchange rate and a parallel market rate may help attract investors who had shunned Africa’s biggest economy. 

“Tinubu has got off on the right foot with markets by promising to remove the fuel subsidy and unify Nigeria’s multiple exchange rates, implying a long overdue devaluation may finally be on the cards,” said Patrick Curran, a senior economist at London-based Tellimer. “But it remains to be seen if he will be able to follow through on his market friendly rhetoric.”

Nigeria has a tightly controlled official rate that has little liquidity; and an uncontrolled, unauthorized parallel market, where most residents source their dollar needs. The spread between the official and the black market rate discourages foreign investor inflows. The naira traded at 464.79 naira per dollar on the official market on Tuesday, compared with 765 dollar on the unauthorized market in Lagos.

The International Monetary Fund has cited central bank interventions in Nigeria’s foreign-exchange market as a hindrance to capital inflows. Foreign direct investment in the West African nation plunged 52% to $698 million in the six years through 2021. By comparison, inflows into Indonesia increased 6% to $31 billion in the same period.

Africa’s largest producer of crude would have had to spend 6 trillion naira ($12.9 billion) — about two-thirds of the revenue expected to be generated by oil and gas output — this year if the subsidies were to continue. 

“The subsidy removal and rates unification instill confidence among both local and foreign investors,” said Ayodeji Dawodu, head of Africa sovereign and corporate credit research at BancTrust & Co. in London. “Subsidy has been a key hindrance to the government on the fiscal side because it is deducted from revenue and as a result strains spending capacity.”

--With assistance from Colleen Goko.

(Updates to add stocks performance from first paragraph.)

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