Nigerian Bonds Yield Rises on Negative Risks Appetite
The average yield on Nigerian government bonds surged in the secondary market as investors cashed out on their positions ahead of the Debt Office monthly supply.
The market anticipates a significant boost in bond supply in the first quarter as Nigeria’s budget deficit widened. Analysts said the government favours both local and external borrowing to bridge the spending gap in 2026.
Based on the pattern observed last year, the authority is expected to front-load the local bourse amidst expectations that Nigeria’s headline inflation rate will surge significantly due to the base effect, which could keep the benchmark interest rate elevated.
Hence, portfolio holders trimmed their holdings due to elevated supply expectations from Q1-2026 auctions, and higher stop rates dampened demand.
Trading patterns last week reflected weak risk appetite typical of the start of the year, leading to broad sell-offs across the curve, with yields rising more sharply at the short and mid tenors.
Midweek, sentiment dipped further following the announcement and outcome of a larger-than-expected Treasury bills auction conducted at higher stop rates across tenor.
This prompted investors to reconsider relative value and rotate away from bonds, resulting in widespread repricing across the curve.
Notably, at the belly of the curve, the FGN 2031, 2032, and 2033 bonds saw yields drift with a range of 8 bps – 50 bps to around 17.45%–17.63%, reflecting significant selling pressure.
Caution sentiment persisted to the end of the week, with trading activity remaining thin and skewed toward the offer side. Overall, the average benchmark yield rose by 21bps week on week to close at 16.76%, according to AIICO Capital Limited. Oando: Building Enduring Value through Long-Term Commitment
