Nigerian government bond yields have declined further in the secondary market, settling at 16.28%, as institutional investors increase their exposure to fixed income amid declining inflation and improved system liquidity.
This shift in market sentiment comes as Nigeria’s headline inflation rate eased to 22.22%, while the Monetary Policy Rate (MPR) remained elevated at 27.50%. With real returns standing strong at 5.28%, asset managers have intensified their interest in bonds.
Market analysts attribute the yield compression to recent coupon payments worth N284.73 billion from the Federal Government, which significantly boosted system liquidity to over N1.35 trillion. The influx of funds has encouraged reinvestment, particularly from pension funds and local banks.
Cordros Securities reported that the average yield dipped across all segments of the curve: short-term bonds dropped 35 basis points, mid-tenor instruments fell by 43 basis points, and long-term securities eased by 17 basis points. The steepest drops were recorded in APR-2029 (-48 bps), APR-2032 (-69 bps), and MAR-2036 (-40 bps) bonds due to increased bargain hunting.
Analysts anticipate that the prevailing downward trend in yields will continue, especially as the Debt Management Office (DMO) seeks to reduce borrowing costs. The upcoming FGN bond auction, scheduled for Monday, is expected to further influence yield trajectories.
Investors are positioning for potential monetary easing, and the market is responding positively to this outlook. With disinflation underway and the rebased consumer price index supporting lower inflation projections for H2 2025, the bond market is poised for continued bullish activity.
