Bonds issued by the Federal Government of Nigeria (FGN) saw a slight decrease in average yield as investor demand for local bonds increased. Large bets on government securities are being made by local banks and other approved dealers with substantial capital, even if the real return is still subject to circumstances related to increased inflation rates.
Although the yield on government assets now outpaces headline inflation, the local debt market has remained relatively stable due to government pension asset allocation policies. To support the government budget, the Debt Management Office has successfully raised a sizeable sum of money on the market.
Spot rates on its most recent issue changed in response to market conditions and economic developments as investors started to look for larger returns on their investments as triggers started to accumulate. Interest rates and inflation have been ascending while naira plunged to all time low.
A report by FitchSolutions suggests that deposit money banks in Nigeria showed a preference for investing in local debt instruments rather than lending in spite of the regulator’s loan-to-deposit target. Naira Devaluation Deepens Economic Crisis in Nigeria
Credit migration in the banking sector has been flagged as a reason for low lending appetites for some banks. A large fund base helps institutional investors in taking a position. Details from the secondary market trading activities on Wednesday showed that yield adjustment followed buying sentiment in the MAR-24 and JAN-26 FGN papers.
As a result of demand for short duration, its associated yield declined by 5 basis points. Increased hunting by market participants for JAN-2026 bond dragged its yield line lower by 12 basis points. Conversely, the average yield closed flat at the mid and long segments, Cordros Capital said in its update.
“We witnessed a 5bps contraction at the short-end of the curve, with the MAR-2024 and JAN-2026 bond papers recording 12bps yield increases to 7.32% and 14.81%, respectively”, CardinalStone Limited told investors via email. Overall, the average yield contracted by a marginal 1bp to 15.72%.