Nigeria’s bond market traded on a bullish note on Wednesday as yields fell across maturities amid renewed investor demand for fixed-income assets. The heightened activity was driven by expectations surrounding the Debt Management Office’s (DMO) fourth-quarter auction rates and improving macroeconomic indicators suggesting a potential cut in interest rates.
Market participants continued to position themselves strategically following a noticeable drop in inflation, fueling optimism that the Central Bank of Nigeria (CBN) could introduce monetary easing measures to stimulate economic growth. As investors sought to lock in favorable yields on naira-denominated instruments, trading momentum strengthened significantly in the secondary market.
According to market analysts, the current yield movement is being shaped by rapidly evolving economic conditions that may lead to lower government borrowing costs. The country’s real interest rate has now widened to approximately 9%, reflecting a high nominal rate environment alongside successive declines in inflation levels.
The Monetary Policy Rate (MPR) was recently lowered to 27%, while headline inflation dropped by 210 basis points to 18.02%. This combination leaves investors with a real return of around 8.98%, a rare positive spread in Nigeria’s recent economic history.
“Declining inflation and expectations of further policy easing could drive additional yield compression across the naira bond market,” analysts at CardinalStone Securities Limited stated in a market commentary. “Although the yield curve may remain inverted in the near term, sharper corrections are likely at the short end of the curve.”
Trading in the secondary bond market began cautiously but later turned positive after the release of September inflation figures. Federal Government of Nigeria (FGN) bonds with maturities in 2032, 2033, and March 2035 all recorded notable yield declines from the previous close. As a result, the average benchmark yield fell by three basis points to 15.98%.
Fixed-income analysts predict that investors will continue to respond positively to the disinflation trend, especially with the likelihood of an interest rate cut at the upcoming November meeting of the Monetary Policy Committee (MPC).
Data from the National Bureau of Statistics (NBS) showed that Nigeria’s annual inflation rate dropped to 18.02% in September 2025 from 20.18% in August 2025, marking the first time in three years that the rate has fallen below 20%.
The slowdown in inflation was largely supported by a rebound in crude oil output, moderation in food prices as the harvest season commenced, and relative stability in the exchange rate. On a month-on-month basis, inflation rose marginally by 0.72%, slightly below the 0.74% recorded in August 2025, indicating a steady easing of price pressures.
Analysts believe the sustained disinflation could lead to a renewed appetite for long-term government securities as investors seek to take advantage of declining inflation and attractive real yields.
The overall sentiment in Nigeria’s debt market remains optimistic, with traders anticipating further downward pressure on yields as macroeconomic fundamentals continue to improve and expectations of monetary policy easing gather momentum.
