LONDON (AFX) - The pound slumped on fears that Nigeria is heading towards an Argentine-style default on its 33 bln usd of overseas debt, much of which is owed to the UK. The Guardian newspaper reported this morning that the oil-rich west African nation is at risk of defaulting on its debt unless Western creditors accept a deal to alleviate the country's financial burden. The newspaper quotes Farouk Kawan, the chairman of the finance committee of Nigeria's house of representatives, as saying that it is "unconscionable" that the country has paid 3.5 bln stg in debt service over the past two years while the debt burden has simultaneously risen by 3.9 bln even without any new borrowing. "The UK holds 21 pct of total Nigerian foreign debt, suggesting that sterling will suffer most on the likely debt default," said Hans Redeker, global head of FX strategy at BNP Paribas. Once the report hit the trading desks in London, the pound dropped from above 1.91 usd towards the 1.9050 usd mark. "There's no doubt the pound slumped after than story did the rounds," said Neil Mackinnon, chief economist at ECU Group.

Elsewhere, the yen slipped back slightly following some disappointing Japanese economic data. Household spending in Japan during March dropped 1.1 pct from the previous month, reinforcing fears that consumers won't be a driving force in the country's recovery from recession.