Investors pile into Nigerian Eurobonds as yields fall to 6.89%

Nigeria’s Eurobond market extended its bullish momentum this week, with average yields declining by six basis points to 6.89 percent from 6.96 percent, as renewed investor demand lifted prices across maturities. The drop in yields signals a strengthening appetite for Nigerian sovereign debt in the international market.

​Investors increased purchases of existing bonds, pushing prices higher and borrowing costs lower for the government. Buying interest was spread across the curve but was most pronounced in the mid-section, reflecting stronger demand for medium-term instruments.

​Mid-tenor bonds lead market gains

​Instruments such as the January 2031, February 2032, and February 2038 maturities recorded yield declines of 14 basis points, 12 basis points, and 11 basis points respectively. This highlights a clear investor tilt toward mid-tenor exposures.

​However, the trend was not entirely uniform. Shorter-dated instruments showed signs of pressure, with the September 2028 bond posting a mild yield increase of two basis points, suggesting some caution regarding near-term risk.

​Analysts at Meristem Securities Limited noted that buying interest was spread across the curve, with the strongest demand observed in mid-tenor bonds. CSL Stockbrokers analysts also pointed to improving global sentiment, linked to easing geopolitical tensions in the Middle East, as a key driver.

​A temporary ceasefire involving the United States, Israel, and Iran has helped stabilise the Strait of Hormuz and raised expectations of a potential de-escalation. This has supported investor confidence and driven renewed interest in emerging market assets.

​Fiscal outlook bolstered by oil prices

​Akintayo Popoola, an investment analyst, said sentiment toward Nigeria is improving, driven largely by higher oil prices which have strengthened the country’s fiscal outlook. This positive backdrop, combined with a softer US dollar and expectations of a less aggressive Federal Reserve, has supported demand.

​Victor Ogundijo, a CardinalStone Partners fixed income analyst, noted that movements were also tied to global oil markets. Stalled progress in talks between the US and Iran pushed oil prices higher, boosting Eurobonds issued by oil-exporting countries such as Nigeria and Angola.​

The higher drift of oil prices has allowed Eurobonds from Nigeria and Angola to outperform within the Africa credit space. In contrast, oil-importing countries like Egypt and Kenya saw declines as energy costs impacted their fiscal positions.

​The concentration of demand in mid-tenor bonds suggests investors are taking a more balanced position, avoiding short-term uncertainty while remaining cautious about long-dated risks. This highlights that Nigeria’s recent gains are supported largely by external factors rather than a shift in domestic fundamentals.(BusinessDay)