Foreign Buyers Return to Nigeria Eurobonds, Push Average Yield to 7.03%

Yields on Nigeria’s sovereign Eurobonds declined as foreign investors increased purchases of the country’s dollar-denominated debt. The average Eurobond yield fell by four basis points to 7.03 per cent, Cowry Asset Limited said, supported by renewed buying interest and optimism about Nigeria’s economic reforms and improving oil-related fiscal prospects.

The demand came despite selling pressure in parts of the African Eurobond market. Investors targeted Nigerian securities ahead of fresh inflation data and developments in global crude oil prices.

Short and medium maturities lead buying

Buying interest was strongest in short- and medium-term maturities. The FGN Euro 3 and FGN Euro 7 bonds each recorded a 24 basis point decline in yield, to 5.96 per cent and 7.23 per cent respectively.

Other maturities also fell. The FGN Euro 5 yield dropped by 21 basis points to 6.83 per cent. The FGN Euro 10 fell by 19 basis points to 7.65 per cent. The ultra-long FGN Euro 20 bond recorded a smaller decline of 14 basis points, bringing its yield to 8.34 per cent.

Rally follows last week’s gains

The latest movement followed a broader rally in Nigerian Eurobonds last week, when average benchmark yields contracted by 16 basis points. The March 2029 and February 2032 notes recorded the steepest declines, with their yields falling by 19 basis points each.

Analysts attributed the improved demand partly to investors seeking opportunities in Nigerian dollar securities amid expectations of stronger oil-related revenue and continued implementation of economic reforms. The outlook has also been supported by the United States Federal Reserve’s decision to pause interest rate increases, which could sustain demand for emerging-market debt.

Analysts cautioned, however, that persistent inflationary pressures and elevated global borrowing costs could limit further declines in Nigerian Eurobond yields.

Economist flags inflation, oil and global rates

"Right now, the direction of international interest rates, crude oil prices and domestic inflation will remain important factors shaping foreign investors’ appetite for Nigeria’s external debt," said Abuja-based economist Chukwunonso Iheoma.

He said the decline in Nigeria’s Eurobond yields suggests investors were becoming more comfortable with the country’s sovereign risk and were now willing to take exposure to its dollar-denominated debt.

"However, sustaining that momentum will depend on Nigeria’s ability to strengthen foreign exchange earnings, manage debt-servicing obligations and demonstrate durable macroeconomic stability," he added.

The yield drop points to improved appetite for Nigeria’s dollar debt. Analysts say inflation, crude oil prices and global interest rates will determine whether that demand lasts, with direct implications for Nigeria’s external debt costs and foreign exchange sentiment.