Africa News blog

Buy on the Nigeria rumour, sell on the Niger fact

Confusion over the names of two similar-sounding African countries may have helped boosted oil prices to near $80 a barrel this week as traders rushed to buy oil after reports of a military coup.

A Reuters reporter received a flustered phone call from a hedge fund partner who had heard animated discussion in the market about an incident in Nigeria, only to realise that traders had muddled up Africa’s biggest oil producer with its neighbour Niger.

“Markets took off at around the same time a Reuters story came out about gunfire erupting in the Niger capital in an apparent coup bid, mistaken by many as being Nigeria,” said Tom Bentz, analyst at BNP Paribas Commodities.

Reuters first broke news of heavy gunfire and a coup in Niger’s capital, Niamey, on Thursday. Prices jumped to a one-month high of $79.29 a barrel during the day.

While a coup in Nigeria would almost certainly rock crude oil benchmarks, a coup in Niger  — which has yet to produce oil — would almost certainly not, barring linguistic confusion.

Traders said that an oil market version of the game “Chinese whispers” rather than poor geography may have been behind the jump, as some scrambled to call the market amid mounting confusion over the titles of the two countries which share the same first five letters. The fact that Nigeria’s main oil producing region is called the Niger Delta and is an area of political unrest probably also stoked the rumours. A popular trading mantra is “buy the rumour, sell the fact”.

But far from being a costly mistake, the decision to buy oil on the Niger coup was a flash of fortuitous genius for some as oil prices continued rising afterwards to within cents of $80 a barrel on Thursday, spurred by other factors such as tension over Iran’s nuclear programme and a weaker dollar.