Yields on Nigerian government bonds rose last week as investors reduced their demand for fixed-income securities, pushing bond prices lower. The average yield on Federal Government of Nigeria bonds increased by 11 basis points week-on-week to 15.92 per cent, according to market analysts. This development is attributed to investors' cautious approach in the secondary bond market, leading to weaker demand across major maturities.
The recent 3.5 percentage-point cut in the Central Bank of Nigeria's benchmark interest rate is also influencing the market. Analysts expect this reduction to put pressure on fixed-income yields in the coming months. Meristem Securities noted that the lower policy rate would likely encourage investors to adjust their expectations for bond yields, particularly as the market enters the fourth quarter.
The decline in inflation is another factor shaping investor expectations. Headline inflation fell to 15.39 per cent in August 2026, increasing expectations that inflation could continue to moderate. Lower inflation can reduce the returns investors earn after accounting for rising prices, making investors more selective when buying bonds.
Trading was mixed across different government bond maturities during the week. The yield on the five-year bond rose by 10 basis points to 16.25 per cent as sellers returned to the market. In contrast, demand for the 10-year bond pushed its yield down by six basis points to 15.95 percent. Yields on the three-, seven- and 20-year bonds remained unchanged at 16.10 per cent, 16.07 per cent and 14.66 per cent, respectively.
Despite the recent increase, bond yields remain significantly higher than they were at the beginning of the year, with different maturities trading between 0.68 and 1.04 percentage points above their year-opening levels. Cowry Asset Management said weak demand could continue to put pressure on bond prices and keep yields elevated in the short term.
However, analysts said the relatively high yields could eventually attract investors back into the market, particularly if liquidity conditions improve. Investors could also reposition their portfolios across different maturities as expectations around interest rates and inflation become clearer.
The bond market's performance is closely monitored by investors and analysts, who are keenly awaiting further developments in the economy. The Central Bank of Nigeria's policies and the government's fiscal plans will likely play a significant role in shaping the market's trajectory in the coming months.
Key points
- Nigerian bond yields rose to 15.92% due to reduced investor demand.
- The recent cut in the Central Bank of Nigeria's benchmark interest rate is expected to put pressure on fixed-income yields.
- Despite high yields, weak demand could keep bond prices under pressure in the short term.
