Inflation concerns triggered a wave of selloffs in Nigeria’s bond market ahead of fresh issuances slated for the first quarter of 2025. The rising inflation rate, which climbed to 34.80% in December 2024, has eroded the real returns on investments, dampening market sentiment.
Throughout the week, bearish trends dominated trading in the local bond market, particularly affecting mid-term instruments like the February 2031 and May 2033 bonds, which were offered at yields of 22.10% and 21.20%, respectively, according to market reports.
The selloff trend steepened the yield curve as investors shifted focus to mid- and long-dated bonds, including the February 2031, February 2034, and June 2053 maturities, noted AIICO Capital Limited in its weekly update. Early trading sessions began cautiously, with mild selloffs as market participants awaited critical triggers such as the Q1 2025 bond auction calendar and the latest inflation data.
Despite the prevailing risk-averse sentiment, some pockets of demand emerged for the February 2031 and February 2034 bonds. However, trading volumes remained subdued due to uncertainties surrounding the Debt Management Office’s (DMO) planned bond issuances in Q1 2025. The DMO recently announced plans to reopen the April 2029 and February 2031 bonds while introducing a new issuance maturing in January 2035.
As bearish pressures persisted, the average yield on mid-term bonds rose by 39 basis points (bps) week-over-week to 20.09%, according to AIICO Capital Limited. The market is expected to maintain a cautious tone as participants weigh their positions ahead of the auction.
Across the benchmark curve, yields increased in the short (+28 bps), mid (+48 bps), and long (+4 bps) segments, reflecting selloffs in bonds such as the January 2026 (+107 bps), July 2034 (+139 bps), and April 2037 (+32 bps).
