By Boluwatife Oshadiya | August 31, 2026
Key Points
- Average FGN bond yield rises two basis points week-on-week to 16.87%
- Investors show weak demand for local bonds while Treasury bills attract stronger attention
- Selective buying emerges in 2028, 2029, 2032 and 2037 FGN bonds
Main Story
Nigerian government bond yields rose last week as investors remained cautious in the secondary market despite surplus financial-system liquidity. The average Federal Government of Nigeria (FGN) bond yield increased two basis points week-on-week to 16.87%, as subdued demand caused prices to weaken across parts of the market, according to AIICO Capital Limited.
Investor attention shifted towards Nigerian Treasury bills, while activity in local bonds remained muted amid tight pricing. The cautious sentiment contributed to bond price depreciation and a corresponding rise in yields.
AIICO Capital said sentiment improved during the week, with selective buying emerging in longer-duration securities. Demand strengthened from midweek into Thursday following positive sentiment at the Treasury Bills auction, supporting buying interest across short- and mid-curve papers.
Investors showed particular demand for FGN bonds maturing in 2028, 2029, 2032 and 2037, while activity at the long end remained subdued as investors focused on securities offering more attractive yields.
The market’s repricing followed a broader disinflationary environment. Headline inflation slowed to 15.43%, according to the figures cited in the market report, widening real returns on naira-denominated assets and creating room for lower borrowing rates at the primary bond market.
AIICO Capital said the lower spot rates at the August primary auction were also consistent with efforts to reduce the government’s borrowing costs.
What’s Being Said
“We expect the domestic bond market to remain cautious in the near term, with yields likely to stay elevated amid subdued demand and prevailing liquidity conditions,” AIICO Capital Limited said in its investors’ note.
What’s Next
- Investors are expected to continue selectively positioning across the bond curve based on relative yields
- Market participants will monitor forthcoming government debt supply and liquidity conditions for further direction on bond yields
Bottom Line:
The rise in average bond yields reflects a market that is not responding uniformly to improving liquidity and lower inflation. Investors are becoming more selective, favouring securities where yields adequately compensate for the funding and duration risks.
