Investor interest in Federal Government of Nigeria (FGN) bonds weakened in the secondary market as participants adopted a cautious stance ahead of an expected surge in first-quarter bond supply.
Market sentiment has been shaped by anticipation surrounding the Debt Management Office’s forthcoming 2026 borrowing programme, which is expected to outline an expanded issuance strategy in response to Nigeria’s widening fiscal deficit. Fixed-income investors are increasingly positioning for heavier supply conditions that could pressure prices in the near term.
The outlook, combined with a recent reversal in the disinflation trend, has prompted portfolio rebalancing across the market. Pension fund administrators, asset managers and institutional investors are adjusting duration exposure and yield strategies in an effort to preserve returns amid evolving macroeconomic signals.
Despite easing inflationary pressures, real yields across Nigeria’s fixed-income instruments have remained firmly in double-digit territory. Analysts note that recent repricing across the yield curve reflects lingering effects of spot rate adjustments introduced by the Central Bank of Nigeria (CBN) in the final quarter of 2025.
Trading activity in the secondary market remained subdued over the past week, with sell-side pressure dominating most tenors as investors continued to reduce exposure to longer-dated securities. This broad-based trimming pushed the average benchmark yield on FGN bonds higher by 12 basis points week-on-week, closing at 16.75%.
The market opened the week on a cautious note, characterised by light participation and mild sell-offs as investors awaited the release of December inflation data. Average benchmark yields climbed to approximately 16.80% early in the week, reflecting uncertainty over near-term policy direction and interest rate expectations.
According to AIICO Capital, midweek trading offered little relief, with most bond maturities closing flat amid thin liquidity and persistent risk aversion. However, sentiment improved toward the latter part of the week following the publication of December’s Consumer Price Index (CPI), which printed at 15.15%.
The inflation figure, which came in softer than market expectations due largely to methodological adjustments, triggered renewed buying interest—particularly across short- to mid-dated instruments. Bonds maturing on 21-Feb-2031 and 15-May-2033 recorded notable yield compression on Thursday.
The improved tone carried into Friday, with selective demand emerging across key maturities. The 15-May-2033, 21-Feb-2031 and 17-May-2029 bonds posted yield declines of 11 basis points to 17.53%, 10 basis points to 17.49% and six basis points to 17.37%, respectively.
Despite the late-week recovery, early selling pressure proved dominant, leaving the average benchmark yield up 12 basis points at 16.75% by the close of the week.
 bonds weakened in the secondary market as participants adopted a cautious stance ahead of an expected surge in first-quarter bond supply.){kind=link}