The average yield on Nigerian government bonds increased by three basis points in the secondary market, closing at 18.46%, according to reports from traders.
Investors were seen adjusting their portfolios ahead of the release of February’s inflation data. Most activity was concentrated in the mid-segment of the bond curve, particularly for FEB-31 (+39bps), JUL-30 (+27bps), and NOV-29 (+13bps) papers, according to a report by CardinalStone.
During early trading sessions, weak demand and liquidity constraints put pressure on mid-tenor bonds. Heavy selling led to limited transactions on February 2031 and May 2033 bonds. By midweek, improved offers appeared for April 2029, February 2031, and May 2033 bonds, but wide bid-offer spreads limited the number of transactions.
Market Summary
The average yield increased in the short (+4bps) and mid (+12bps) segments due to selloffs of JUL-2030 (+33bps) and FEB-2031 (+12bps) bonds.
The long-term bond yield remained unchanged.
Analysts at Cordros Capital Limited predict that bond yields may decline in the coming weeks due to expectations of reinvestment from coupon payments. Over the medium term, yields could further moderate based on anticipated monetary policies and demand-supply dynamics.
Inflation and Economic Outlook
Headline inflation is projected to decline further in February after rebasing the Consumer Price Index (CPI) to reflect 2024 as the new base year. In January, inflation dropped to 24.48% year-on-year from 34.80% in December 2024.
Nigeria’s GDP expanded by 3.84% in Q4 2024, up from 3.46% in Q4 2023, marking a full-year growth rate of 3.40%—the fastest in three years. While the decline in inflation and economic growth are positive signs, challenges such as currency volatility, weak manufacturing, and high living costs persist. The effectiveness of government policies, particularly the Central Bank’s monetary tightening and fiscal reforms, will be key to sustaining economic stability.
