Renewed demand lifts Nigeria Eurobonds after previous selloff

Nigeria’s sovereign Eurobonds strengthened last week, reversing earlier losses as investors returned to the country’s dollar-denominated debt amid improving sentiment.

The renewed buying interest pushed bond prices higher and compressed their yields, demonstrating increased confidence in Nigeria’s credit profile despite lingering global economic uncertainties.

Data from Meristem Securities showed average yields on Nigerian Eurobonds declined by four basis points during the week to 6.91 per cent from 6.95 per cent. This means stronger demand after the previous week’s selloff had created more attractive entry points for investors.

The recovery came after Nigerian Eurobonds suffered losses a week earlier when average yields rose by nine basis points to 6.96 per cent. The earlier decline in prices was driven by heightened geopolitical tensions in the Middle East and expectations that global interest rates, particularly in advanced economies, would remain high for longer, prompting investors to reduce exposure to emerging market debt.

Meristem said trading activity during the latest week was concentrated on the sovereign bonds maturing on 28 November 2027, 23 February 2038, and 28 September 2051. Yields on the three instruments fell by eight, five and four basis points, respectively, underscoring renewed demand across different maturities.

“The Nigerian Eurobond market reversed the previous week’s bearish trend, suggesting renewed investor appetite for Nigerian sovereign credit following the recent uptick in yields,” the investment firm said.

CSL Stockbrokers also linked the market’s improved performance to growing confidence in Nigeria’s macroeconomic outlook.

“The bullish sentiment likely reflected investors’ optimism around improving domestic macroeconomic fundamentals and firm crude oil prices, alongside sustained investor appetite for higher-yielding emerging market debt,” CSL Stockbrokers said.

In contrast, the weakness recorded in the preceding week reflected investors’ migration toward US fixed-income securities. Rising crude oil prices had reinforced expectations that major central banks, especially the US Federal Reserve, could maintain restrictive monetary policy for longer, reducing the appeal of emerging market bonds, including those issued by Nigeria.(Punch)