Benchmark Yield Behind 16% as Nigeria Bonds Rally

The average yield on Federal Government of Nigeria (FGN) bonds declined marginally as investors’ appetite for local bonds improved. Though real return remains exposed to higher inflation rate conditions, local banks and other authorised dealers with sizeable funds are betting large on government instruments.

Yield on government assets is currently far ahead of headline inflation but government policy on pension asset allocation has kept the local debt market at a good temperature. The Debt Management Office has successfully raised a significant amount in the market to support the government budget.

Spot rates on its latest issuance adjusted in line with development in the economy, and market dynamics as investors sought higher returns on investment as catalysts began to build up. Both inflation and interest rates have been ascending while naira plunged to all time low.

A report by FitchSolutions suggests that deposit money banks in Nigeria showed a preference for investing in local debt instruments rather than lending in spite of the regulator’s loan-to-deposit target. Naira Devaluation Deepens Economic Crisis in Nigeria

Credit migration in the banking sector has been flagged as a reason for low lending appetites for some banks. A large fund base helps institutional investors in taking a position. Details from the secondary market trading activities on Wednesday showed that yield adjustment followed buying sentiment in the MAR-24 and JAN-26 FGN papers.  

As a result of demand for short duration, its associated yield declined by 5 basis points. Increased hunting by market participants for JAN-2026 bond dragged its yield line lower by 12 basis points. Conversely, the average yield closed flat at the mid and long segments, Cordros Capital said in its update.

“We witnessed a 5bps contraction at the short-end of the curve, with the MAR-2024 and JAN-2026 bond papers recording 12bps yield increases to 7.32% and 14.81%, respectively”, CardinalStone Limited told investors via email.  Overall, the average yield contracted by a marginal 1bp to 15.72%. Benchmark Yield Behind 16% as Nigeria Bonds Rally