The yield on Nigerian government bonds dropped slightly to 18.46% in the secondary market due to a mix of trading activities and investor sentiment shifts. The declining yield reflects Nigeria’s broader economic landscape, where interest rates have surged ahead of inflation, making bonds an attractive option for investors looking for inflation protection.
However, this trend poses new risks. Lower bond yields could lead to capital outflows, as investors might seek higher returns elsewhere. This situation could, in turn, weaken the naira and counteract the CBN’s monetary policies.
“While a decline in bond yields helps the government manage its domestic debt servicing costs, there is concern that lower returns might trigger capital flight, putting additional pressure on the naira,” financial analysts at CardinalStone Partners Limited warned in a report.
The secondary bond market recorded mixed performances, with strong buying interest in the March 2025 and January 2026 maturities. As a result, average FGN bond yields dropped by 8 basis points to 18.45%, according to analysts at Cowry Asset Limited.
Despite this, trading volumes remained low, with wide bid-ask spreads limiting market activity. Early in the week, demand was focused on the April 2029, February 2031, and May 2033 bonds, but supply was scarce. By midweek, yields saw a slight increase as traders took a cautious stance, awaiting the outcome of the Treasury bills auction conducted by the CBN.
Market sentiment remained mixed towards the end of the week. Investors showed buying interest in the January 2035 bond, but there was selling pressure on the 2031 and 2034 FGN Bond maturities, which caused a slight yield increase.
TrustBanc Financial Group Limited reported that market pressure built up across the bond curve, particularly at the short- and mid-term segments. The February 2031 bond faced the most selling pressure, while the April 2029 and July 2034 bonds contributed to an overall bearish market sentiment.
