Nigeria Bonds and T-Bills Maintain Steady Returns Amidst Naira Depreciation

Amidst a decline in the local currency, data sourced from the market has revealed that the average returns on Nigeria’s Federal Government borrowing instruments, namely Bonds and Treasury bills, have remained stable.

In the Treasury bills secondary market, trading occurred at a subdued pace, with the average yield remaining unchanged at 7.3%. Similarly, the average yield in the OMO (Open Market Operations) segment held steady at 11.0%.

Sentiments in the FGN (Federal Government of Nigeria) bond secondary market displayed a mix of trends but leaned towards a bullish outlook. The benchmark yield, in general, remained unchanged at 14.06%. Across the benchmark curve, analysts noted that the average yield experienced a contraction of 8 basis points in the short-term due to increased buying interest in the MAR-2025 bond, which saw yields drop by 39 basis points.

The yield curve, however, expanded by 7 basis points in the mid-segment, primarily driven by profit-taking activities on the APR-2032 bond, which saw yields increase by 13 basis points. Meanwhile, the average yield remained stable at the long end of the curve. The 10-year borrowing cost for FGN yielded approximately 14.33% (up from 14.25%), while the 20-year and 30-year papers held firm at 15.19% and 15.40%, respectively.

Overall, bond market activities were subdued, with most bond paper yields closing relatively unchanged. Nevertheless, the market witnessed a six basis points appreciation in the mid-segment of the yield curve, offset by an eight basis points contraction at the short-end of the bond yield, according to CardinalStone Securities.

In the money market, funding rates continued to adjust downward as liquidity flowed into the financial system. The Nigeria Interbank Offered Rate (NIBOR) saw declines across most tracked maturities, owing to the absence of funding pressures. Consequently, the overnight lending rate decreased by 40 basis points to 2.60%, while the open repo rate moderated to 1.90% from 2.58%, as per FMDQ data.

On the international debt capital market, FGN Eurobonds displayed a bearish trend across all maturities, resulting in an average secondary market yield of 11.34%.

In the foreign exchange market, the naira faced depreciation due to increased demand. Specifically, the local currency depreciated by 3.2% to N762.71 per US dollar at the Investors and Exporters window. In the parallel market, the exchange rate worsened to N925, based on channel checks.